Asda’s Just Essentials has been a resounding success. So much so that buying limits had to be introduced on the budget range, which scooped a Grocer Gold Award this summer.
So the rationalisation of Just Essentials, reported this week, may seem like an odd move. It’s not a game-changing reduction in lines – it has fallen from 293 to 269 SKUs, according to IPLC research – and may simply come down to factors that Asda highlighted, such as availability and duplication.
But it could equally be a calculated decision. As commentators pointed out at the time of launch, a hugely successful budget range is a double-edged sword. Yes, it is a powerful proposition during a cost of living crisis – one that can help secure loyalty and drive footfall. On the flipside, margins are low or even negative. So if the range is too appealing, it poses a threat to margin mix – and could even encourage shoppers of standard tiers to trade down.
By all accounts, Asda’s range has been selling well ahead of expectations. As summed up by Paul Stainton of IPLC: “It must be costing them a hell of a lot of money.”
If this was a calculated move, Asda would be in good company. Morrisons is also looking to manage sales of its budget range. While it has rolled out its Savers to c-stores, it’s still only a limited selection. And IPLC found its Savers SKU count was noticeably lower online than it was in physical stores.
It’s an understandable tactic to preserve margin mix. Still, Asda could be playing a dangerous game at a time of ever-intensifying price competition. For the second week in a row, the typically unrivalled victor on price has been undercut by Sainsbury’s and Tesco’s loyalty schemes in the Grocer 33.
Granted, this doesn’t take into account Asda Rewards, which is a more traditional, rewards-building loyalty scheme. And a reduction on Just Essentials SKUs is unlikely to make a seismic impact on shoppers. But if this is part of a wider strategy, it could risk pushing shoppers into the arms of rivals. In this case, Asda will need to think carefully about the balance between delivering for shoppers, and delivering on its margin mix.