Supermarket group Asda will hire 4,500 new workers to handle an expected expansion in online grocery orders, but plans to make 5,000 other store staff redundant.
The company, which has just been acquired by petrol station group EG and private equity firm TDR in a heavily debt-funded transaction, said it expected to be able to fulfil 1m online orders a week by the end of the year — a level it previously thought would take nine years.
The increase will be achieved through in-store picking, which the company said would create greater capacity, improve slot availability and facilitate same-day deliveries in partnership with Uber Eats.
As a result, two “dark stores” in the London area will be closed, potentially affecting 800 workers, although other units in the north of England will continue to operate.
Dark stores allow online orders to be picked manually by staff without inconveniencing regular shoppers, but as the efficiency of in-store picking and automation technology have improved, they have become less cost-effective.
In-store picking has also helped increase the take-up of click-and-collect, which generates better margins for supermarkets and now accounts for about a fifth of Asda’s online sales.
The UK’s third-largest supermarket is also consulting on a “realignment” of store management roles that could result in 1,100 staff losing their jobs, and a similar exercise in back-office positions that could see another 3,000 staff depart.
Roles such as deputy store manager and heads of sections including bakeries were axed in favour of a single operational management role. The changes partly reflect a trend away from labour-intensive fish, meat and delicatessen counters and the reduced need for cash handling after the coronavirus pandemic drove a big increase in payment card usage.
They also help offset the cost pressure of rising statutory minimum wage levels on a sector that employs hundreds of thousands of hourly paid staff.
But they are likely to be controversial; similar management changes were made by rival J Sainsbury in 2018 and were blamed by some for a subsequent dip in availability and service levels.
In 2019, Asda waged a long battle with the GMB union over changes to employment contracts that raised headline pay rates but made some shop floor workers worse off.
Roger Burnley, Asda’s chief executive, said the past 12 months “have shown us that businesses have to be prepared to adapt quickly to change” and that the company aimed “to ensure as many colleagues as possible stay with us”.
The supermarket stressed that the latest changes were not being made in response to the company’s changing capital structure; its finance costs are expected to increase rapidly as the company is loaded up with debt by its new owners.
It pointed out that under a “hold separate” notice issued recently by the Competition and Markets Authority, EG and its founders Mohsin and Zuber Issa cannot participate in Asda’s decision-making until the regulator has completed an inquiry into whether the takeover will reduce competition in the retail fuel market.