Dalton’s Labs and how he can experiment with confidence.

Since Dalton’s initial review of the Morrisons business last month, analysts have been scrambling to assess the convenience move and where that will be, focussing on the online operation early next year no doubt as they continue to hold a near obsession over these two avenues for ‘growth’. Lab stores are therefore now very much in vogue for the core estate, with experiments taking place to see what works.

As mused on this blog before, Morrisons level of scale is astonishing, not only are they yet to move into convenience or online, they have little non food presence, no clothing and are largely labour intensive in terms of in store operations with archaic systems and a hierarchical structure compared to their rivals.

Whilst they have these avenues to go down to generate more revenue and increase profitability, it will be a brave man that backs against them increasing market share.

Their succession plan seems to have an element of genius about it even if it was by accident rather than design. After the furore over non execs and the subsequent moving upstairs of Sir Ken and the rather surprise appointment of Marc Bolland left the ‘city’ thinking they’d had their way with the appointment of a ‘proper’ CEO.

It worked though, Bolland despite having no retail expertise came into a business that was just emerging from the Safeway debacle and set about not changing the operational basics but bringing the brand into the 21st century with new logos, signage, branding, adverts, slogans…. The business changed its market position thanks to the advertising and like a Morrisons exec said to me ‘we’ve done nothing different, it’s just we’ve started telling people about it’.

In an almost textbook succession plan, analysts started to look longer term and ask where the future sales growth was coming from (online and convenience mentioned again!) and it would be an almost pivotal move for Bolland to decide where he would lead the business next.

We never found out, he decided (around a year ago) to up sticks and move to Marks and Spencer who were needing a new leader to replace the Ken Morrison esque Stuart Rose who was finally letting go of his diktat at M+S. Morrisons had to accept his resignation due to the package being offered by M+S, Marc’s mind was made up, Sir Ken then had a nod towards the city again stating the board needed to look at themselves and start approving remunerations that would allow them to keep top executives (despite an alleged terrible staff turnover, Morrisons do keep hold of their managers and execs compared to rivals).

Rumours galore led to a host of English based executives being linked with the post until little known Irishman Dalton Philips was appointed, former Wal-Mart Germany and recently Loblaw (Canada) CEO, he came with a big reputation and Allan Leighton’s friendship with Sir Ken played a part in luring Dalton and family to Yorkshire.

He inherited a business that was unique, full vertical integration, strong management team, rising market share, coming off a superb set of year end results. Even the archaic IT systems had been finally entered into a process to replace them with the latest Oracle software across the business.

Usually new CEO’s inherit basket cases (see Justin King, Sainsbury’s) but Dalton inherited a business that was going along nicely but again the analysts were all talking about future growth, online Mr Philips? Convenience Mr Philips?

Dalton revealed last month that there would be small labs for both these formats but it’s evident the current business model that Morrisons’ are pursuing works and can still offer further growth and profitability with tweaks to departments and layouts.

This is where the labs concept came in – experimental departments in stores, experimental ways of working to increase efficiency, different ranges and layouts. Although trials, they were not expected to be adverse in terms of sales or profitability.

I’m told York are running an efficiency trial lab store; which involves replenishment being done overnight as usual, late night students and day staff fill up sweets, crisps, paper products and cereals. The major difference is that the hot food counters aren’t pressured to have everything on sale for opening; standard practice is that colleagues start at 6am and prepare all the hot food for sale, the change is that the colleague starts work at 07:30 and starts preparing the hot food.

Upsides are that the food is fresher as it’s been on sale for less time and that the colleague starting at 07:30 is there until 4 / 430pm rather than 2pm so there is no need to invest further hours into the business when making this simple change.

Kirkstall lab are operating a new produce display format (more of which in the next blog) which displays produce on ice, in market stall style displays and does away with the  market stall carts and former display units.

There are more loose items, more organic items and it is likely to drive sales due to the presentation and ease of shopping.

It looks very impressive and I’ll dive into more detail in the next blog regarding this and the other trials in the labs.

The final change and perhaps one that is the most likely way to increase sales easily is to increase your opening hours. Marc Bolland increased most stores opening hours to ensure that customers could shop later,

This year, Morrisons are planning on opening 7am – 11pm from the 1-21st December to capture Christmas shoppers, the confirmation is not forthcoming but a cursory glance across local stores planning permission files shows that they have applied to change their alcohol license agreements from 8am-10pm to 6am -11pm to allow sale of alcohol between those hours, it’s another sign that Morrisons – traditionally criticised for being old fashioned and traditional are being dragged into the 21st century by two innovators – marketing man Marc Bolland and operational guru Dalton Philips.

Who knows where they will head next, their attitude means anything is possible.

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