What’s new at Sainsburys?

sainsburys facia full size

The modest decline in like for like sales for Sainsburys for its second quarter trading is the seventh in a row where the grocer has felt the pressure from competition.

Pricing is the biggest issue that Sainsburys face, competing against Tesco and Morrison, and each in turn struggling against the discounters. Sainsburys response has been to keep pace on key lines but little more and that is starting to take its toll. Tactical pricing activity keeps existing customers coming back, particularly to its stronger convenience arm, but is not exciting or differentiating enough to attract new customers.

The Sainsburys customer is one of the most loyal and trusts Sainsburys for its quality, so steering a steady path may feel right given it has served well in the past and helped to hold market share but it could be so much better.

We are eager to hear about a new marketing campaign, or an innovative personalised digital campaign, but we are left feeling disappointed. When there is so much competition on price, the obvious thing for a retailer to do is draw attention away from the price of essentials and focus on a unique aspect of the proposition which in Sainsburys case could easily be the quality and provenance of its food.

The “Value for Values” campaign should have delivered this but to date it feels very half-hearted. The latest Little Twists campaign feels just as half-hearted in comparison to Lidl Surprises or the Asda pocket tapping advertising. It just isn’t memorable.

In the lead up to Christmas, we should expect to see a new headline grabbing advert, hopefully for the right reasons and a little less controversial than last year’s WW1 epic. The TU brand could be so much more and an advertising effort in that direction could also be well received especially with more effort put into in store execution.

Sainsbury’s Local convenience stores and a consistently well executed online offer are why it is holding ground against the Big 4. It cannot however be complacent in these channels with added competition is on its way from Aldi and Amazon as they both announce online plans this week.

Now is the time to stretch the creative juices in Sainsburys Head Office and challenge the ordinary. There is an opportunity to stand apart from the other major supermarkets and establish a niche if it can be bold enough.

Once famed for its “try something new” campaign, what is new now? Adding a teaspoon of instant coffee to a Bolognese sauce just isn’t enough.

If you would like us to help your retail business go beyond the ordinary then get in touch today.

lidl living wage

How will retail pay for the Living Wage?

We couldn’t be more pleased to see that Lidl has committed to increasing 9000 staff’s wages to the Living Wage from next month. While Sainsburys was quick to announce increased wages, it did not commit to the hourly rate advised by Living Wage Foundation.

This comes after Lord Wolfson of Next raised concerns that retailers may have to increase prices in order to cover the increased wage bill and didn’t rule out Next doing exactly that in the next 12 months.

While the Living Wage does indeed increase the wage bill for retailers, it does not logically follow that retail prices will have to increase to fund it. With productivity modelling of the retailer’s hours, it could be that Next can make savings elsewhere in the wage bill in order to maintain margins across the business.

We have conducted productivity reviews for multiple retailers sometimes to cut labour costs, sometimes to balance costs across stores, but in all cases to date savings have been made which are either improving margin or to be reinvested elsewhere in the business. The added benefit is the improved customer service levels, fresher product and more effective work practices.

Lord Wolfson is known for his pessimistic outlook on Next’s fortunes and the retailer generally performs better than he would make out. However we would encourage him to look inward to the organisation, central operations, store operations and ultimately store hours in order to absorb the cost of paying the Living Wage rather than increase prices because we are certain that there will be savings there if you know where to look.

lidl living wage

Lidl has not indicated it intends to increase prices and given its strength as a discount retailer it would make no sense to do so. The reaction on social media has been very positive to the Lidl announcement and would suggest that an increase in sales would cover the labour bill.

The PR from the Lidl announcement has served the retailer well and others may regret not committing sooner to the Living Wage. However, we expect that others will follow, perhaps not before Christmas but very soon after.

We have skilled technicians and case studies to prove the benefits of productivity modelling, so if you are worried about the impact the living wage will have on your business, please get in touch.

Morrisons focus on simple back to basics retailing


Now that the leaky bucket that was M Local stores has been sold to a team led by retail entrepreneur Mike Greene, we should expect that Morrison’s profit future will look healthier.

The impulsive opening of the convenience stores in poor locations and at high rents was unlikely ever to make money for the grocer but to continue to let the stores trade at such a loss was killing the whole business.

Its approach was not considered not only in terms of location and rent but also in terms of proposition and format. Space was limited, ranges were more extensive that needed and overall the impression of the stores was poor.

Lessons will have been learnt and as Potts said in his statement yesterday, Morrisons has not ruled out the possibility of another crack at convenience.

The growth of the format which is now worth £37.7bn and the competition’s stance on convenience puts Morrisons even further on the back foot and lagging behind the sector. Profits are down and yes the core business needs focus and investment. The disappointment for Potts will be that the sale of M Local didn’t raise more cash and actually leaves the retailer £30m down.

Potts still has a long to-do list which just continues to get longer rather than shorter. With every trading update comes more pressure to turn the retailer’s fate and deliver some good news.

Focus on core supermarkets is warranted, this is where the profit is generated that can support future format development, but is also where the most investment is required. The chicken and egg situation is pushing sales, to raise cash to invest in delivering more profitable sales.

The six priorities cited by Potts in the interim statement today are exactly what the business needs, simple back to basics retailing. However, it’s competition is increasingly sophisticated and creative.

We would like to see Morrisons invest in advertising, identifying its core audience and reconnecting by leveraging existing assets like its vertical integration. We would also love to see Match and More used in a more innovative way to attract customers in the short term run up to Christmas. Perhaps the priority of listening will extend to retail consultants too?

Time is of the essence and a poor Q3 trading would put Morrisons in a very weak position so we will be watching for some quick decisions from Potts in the coming weeks and importantly some quick wins.