Business executives on where it went wrong for Morrisons’ M local stores

On 7 September, Tesco announced the sale of its Korean division Homeplus to a group of investors for a sum of £4.2bn, as the company looks to recover from its financial problems.

Dave Lewis, Tesco’s CEO, said: “This sale realises material value for shareholders and allows us to make significant progress on our strategic priority of protecting and strengthening our balance sheet.”

Following in the footsteps of Tesco, which is the UK’s largest supermarket with a 28.3 per cent share, is Morrisons. The company has revealed 140 M local convenience stores will be sold for a sum of just £25m, and it expects a loss of £30m.

Mike Greene is the man leading the mass acquisition from the firm, which will see him rebrand the locations into My Local – see what he did there?

While his name may not be a household one, the retail entrepreneur has appeared on the Secret Millionaire TV show, which has also featured former Dragons’ Den investor Piers Linney.

His takeover, which will preserve 2,300 jobs and create 200 more, has been backed by Greybull Capital, although the exact details haven’t been disclosed.

Morrisons launched a review of the M local division back in March 2015, which came to the conclusion that significant investment would have been required to turn around the ailing fortunes of the business with new sites and lease commitments – something it wasn’t prepared to go ahead with.

Read more on the big four supermarkets:

“Supermarket distribution depots are not usually experienced or expert in small-drop frequent deliveries … so there’s a cost challenge there,” said Greene, on where he thinks the firm went wrong.

Adding what he and Greybull will do right, however, he said: “We will work with one of the UK’s leading wholesalers that on a daily basis deliver to thousands of small stores and have been doing so for decades, efficiently and profitably in very small drops.”

Morrisons will retain just five M local stores, holding onto locations on garage forecourts or converting them into small supermarkets.

David Potts, Morrisons CEO, said: “Convenience is a large and growing channel in UK food retailing. Morrisons learnt much from its entry into the market, but M local was unable to scale.

“However, we remain open to other opportunities in convenience in the future. I would like to thank all the Morrisons colleagues for their hard work and dedication to M local.”

The descent has been rapid, given that the firm introduced M local in 2013. By comparison, Tesco’s local Tesco Express stores debuted in 1994 and more than 1,600 can be found across the country, while Sainsbury’s celebrated the opening of its 700th Local store opening in February.

How do these firms manage to succeed and continue expanding while Morrisons failed?

“Morrisons has been boss-focussed rather than customer-focussed and the signs of customer discontent have been apparent for years – who was listening and acting on this? Deliberate, proactive exploration of customers wants and needs must be at core of decision-making in a truly customer-focussed business,” Ella Overshott, change management consultant at Pecan Partnership, explained to Real Business.

Others believe Morrisons went too far with accessories and other items, which overloaded M local stores, whereas Tesco Express streamlines the products found in the Express locations to simplify things for customers, knowing the supermarkets will supply other goods.

Overshott concluded: “Analysis of Morrisons’ social media shows growing trend of negative emotions towards their core business. There’s also been a lack of changeability. For a business that has been a “steady-eddy” for years to become changeable can be tough. It takes a fundamental shift in beliefs and behaviour from everyone, including openness, agility, collaboration, pace.”

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