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Argos branches to open in Asda supermarkets if Sainsbury’s merger goes ahead

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Sainsbury’s and Asda today said they would open Argos stores in branches of Asda as part of a cost-cutting drive if their merger wins the go-ahead from competition authorities.

The move would see digital-format branches of Argos open inside Asda supermarkets in the same way that they have opened within branches of Sainsbury’s since that supermarket took over Argos. 

The fresh detail came as the two set out how exactly they plan to cut costs through their mooted merger in order to convince the CMA (Competition and Mergers Authority) to recognise the benefits of merging the two companies. In its preliminary report the CMA said that shoppers could lose out across sales channels from the tie-up. 

The two supermarkets say that their cost savings would also be made by paying suppliers the lower of the two prices that Sainsbury’s and Asda currently pay for the same products, and through buying shared goods and services together. The two have said they would save an estimated £1.6bn through a merger.

Today the two also promised to cut grocery prices to the tune of £1bn a year and cap the cost of fuel from their petrol stations if they get the go-ahead. 

Sainsbury’s chief executive, Mike Coupe and Asda chief executive, Roger Burnley said: “We are trying to bring our businesses together so that we can help millions of customers make significant savings on their shopping and their fuel costs, two of their biggest regular outgoings.

“We are committing to reducing prices by £1 billion per year by the third year which would reduce prices by around 10% on everyday items. We are happy to be held to account for delivering on this commitment and to have our performance independently reviewed and to publish this annually.

“We hope that the CMA will properly take account of the evidence we have presented and correct its errors. We have proposed a reasonable yet conservative remedy package and hope the CMA considers this so that we can deliver the cost savings for customers.”

The final report from the CMA is due on April 30. 

Commenting, Thomas Brereton, retail analyst at data and analytics company GlobalData, said that the picture may have been changed by plans from Ocado and M&S to go into business together on grocery deliveries. 

“For Sainsbury’s to forge on – with what many see as an already lost battle – shows how pivotal Sainsbury’s feels consolidation at the top end of the grocery market is in order to stop long-term share decline at the Big Four, to use economies of scale and pressure on large suppliers to reduce shelf prices for shoppers,” he said. 

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