Morrison's digital boss exits after supermarket chain bets the farm on, er, digital

Profile picture for user slauchlan By Stuart Lauchlan April 8, 2014
Summary:
After a shocking start to the year, things can only get better for Morrisons now the supermarket chain has belatedly got digital religion, surely? Er, not when the guy in charge of digital decides it's time to leave.

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OK, so you’re Morrisons.

You’re a supermarket chain that’s failed to ride the online and digital bandwagon.

Your financial results have suffered as a result.

You watched the guy you’d hired to run your online grocery service walk out the door in January.

But you’ve acknowledge your mistakes and committed to boosting your digital spend to play catch-up with more successful rivals such as Tesco and Ocado.

So what’s the worst that could happen now?

Well, how about having your head of digital development quit on you only weeks after you bet the farm on digital?

Ouch!

Departing digital

Simon Harrow was the former Chief Operating Officer (COO) at Kiddicare, the baby equipment retailer which Morrison’s bought in 2011 to form the bedrock of its own online strategy. Harrow had been responsible for Kiddicare’s digital and platform development.

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Harrow - out

But last month Morrisons chief executive Dalton Philips said the retailer planned to sell Kiddicare and take a writedown on the value of the operation.

It's unclear whether Harrow's decision to quit is connected to this move or not. Morrisons has confirmed his resignation has taken place, but provided no additional information to date.

Harrowing news

It’s the latest blow to Morrisons which continues to lose ground to rivals. According to data released this week from consumer retail research firm Kantar Worldpanel, Morrisons’ share of the UK grocery market fell by 0.5% year-on-year in the 12 weeks to 30th March.

Out of the big four supermarkets, Morrisons suffered most, In stark contrast, budget chain Aldi recorded a record 35.3% increase sales growth to boost its market share to 4.6%, while low-cost rival Lidl saw sales rise by 17.2%.

Edward Garner, director at Kantar, said:

“Amid a challenging market backdrop, individual retailer growth might be expected to be restricted. This is certainly not the case for Aldi which achieved its highest ever growth of 35.3%, boosting the retailer to a record market share of 4.6%. Lidl also experienced strong growth in a record breaking month and now accounts for 3.4% of the market.

“All of the ‘big four’ supermarkets have faced declining sales over the past 12 weeks, which has been accentuated by the late falling of Easter. Nevertheless, they have also seen worrying share declines.”

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Kantar's Garner

Morrisons is losing sales to the discounters, and is struggling because of its lack of established online and convenience arms. The retailer reported pre-tax losses of £176 million for the year to 2nd February, against pre-tax profits of £879 million the year before.

The news of Harrow’s unexpected departure comes on the back of a gloomy note to investors from HSBC which warned:

Looking forward, we cannot see where Morrison's sales growth will come from: large stores across the industry are likely to continue seeing around 5% like for like volume declines, food inflation is falling and the opening programme has been cut. All of which suggest that Morrison's total sales line may be moving structurally backwards, despite the roll-out of convenience and on-line.

The problem for Morrisons is that the proclaimed focus on online looks increasingly undermined, especially given that Harrow’s exit follows January’s resignation of George Dymond, who was recruited to run the retailer’s online grocery service, just weeks after taking on the role.

Morrisons is now focusing its online grocery strategy through a partnership with Ocado, which is running its internet service.

Verdict

Their luck's gotta break at some point, surely?

Priority 1 - get your story straight about why Harrow is leaving just as you've made such a big song and dance about finally having digital religion.

Priority 2 - get a good person into that role ASAP.

One of these two priorities may be harder to achieve than the other. Neither is going to be particularly easy.