Sainsbury’s sales performance may have beaten analysts’ expectations, but its outlook is characterised by significant challenges in returning to sales growth and, more crucially, protecting its operating margin.
As well as the on-going threat from discounters gaining share in Sainsbury’s southern heartland, Mr Coupe will be only too aware of the risks posed by a Tesco with a renewed sense of purpose and an increasingly sharp pencil when it comes to price. Granted, Sainsbury’s has invested in price, but this can arguably be viewed more as a necessity in the current trading environment than an advantage. Also, while the Value Simplicity Programme may have improved the shopper experience, what is not so clear is how shoppers are responding to Sainsbury’s decision to half the number of Nectar points issued against each shopper’s basket spend.
Sainsbury’s continues to perform well in convenience, but the roll out of small stores can only provide part of the long-term answer for Sainsbury’s, and a clear strategy to address declining sales at superstores will be paramount. The reality is that there is no room for complacency, and it is our view that it has never been so important that both Sainsbury’s and its shoppers are clear about the retailer’s proposition, what it stands for and how it continues to be different from the rest of the big four on quality. Differentiation cannot only be delivered through ranges – it needs to permeate through everything the retailer does, much in the same way as EDLP does at Asda.
Ultimately, despite the challenges, Sainsbury’s maintains some real strengths around quality and its (relatively) loyal customer base. It needs to ensure that’s strategy leverages these assets to maximum effect to set it apart, rather than be dragged further into an increasingly hostile, price focused centre ground.