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Asda considers bypassing EUK

Asda has asked around 15 of its entertainment distributors to set up direct accounts, should its relationship with Woolworths-owned buying team EUK ‘suddenly deteriorate’.

And the supermarket has even admitted that it could be tempted into buying EUK as a last resort.

That’s according to Cue Entertainment, which reports that the news was confirmed in an internal Asda email last week. It read:

"We are taking some preparatory steps to ensure we can sell your product. One of the necessary steps is to set your company up as a direct Asda supplier."

Asda General Manager for Music, Video and Games Fergal Gara confirmed the move to Cue, but stressed it was merely "a contingency plan that we do not want to execute". He added that EUK was fully aware of the initiative.

Gara said that some large independent suppliers were keen to go direct with the company as soon as possible – but that it didn't represent a long term solution. He didn't confirm that any of these companies were games publishers.

"Some maybe see it as an opportunity, while others maybe see it as a way to win one over on EUK," he said. "But there is also a lot of naivety as to what it means. Having 20-40 different boxes showing up at every store every day is not manageable.”

The call to list as direct suppliers was “simply a first step”, he said: “We remain 98% convinced that the best and likely route to market will remain EUK. Lots of us have helped EUK to keep the channel open but I can't ask my CFO to take a significant financial risk without having a fall back plan.”

Gara admitted that Asda might look to buy out EUK - in a similar move to Tesco's acquisition of Handleman earlier this year – but added that the possibility had to be weighed against 'operational efficiency'.

The advantage of having a direct relationship with suppliers, he said, was the “agile trading”.

“There is no other decision-making in the process other than what the studio wants to do or what Asda wants to do,” he told Cue.

"That’s the strength,” Gara continued. “What is not ideal — given the volume growth we've driven over the period of the relationship — is the complexity of six different boxes in and six different boxes out, which is far from trivial."

On the subject of store staff, he added: “If I am a colleague in an Asda store and I look at my chart wall on a Tuesday morning and I’ve got three holes, the next thing I need to do to resolve that problem is to know who supplied it — I need a simple corrective action, not a greater level of complexity that relies on understanding studios.”

The news comes after video games publishers told MCV that their relationship with EUK was ‘faltering’ after the firm was refused credit insurance, due to Woolworths' delicate financial position.

MCV has contacted EUK and Asda for comment.

The Woolworths Group reiterated its position to Cue. A statement read:

"The Board of Woolworths Group is comfortable with our financial and cash position. We continue to work closely with suppliers and credit insurers in what is a difficult environment for retail and wholesale.

"While it is true that some credit insurers are tightening trade terms, we are trading as normal with our suppliers and continue to do so. EUK will work closely with all of its customers and suppliers to ensure a successful Christmas period for all."

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Tags: asda , woolworths , euk , fergal gara

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