Asda and Sainsbury’s this morning announced they had agreed a merger, news much heralded over the weekend. The two supermarkets, which together turned over about £51bn in 2017, would together account for about a third of the grocery market and rival market leader Tesco. The news comes less than two years after Sainsbury’s, which looks the dominant partner in this merger, bought Argos. What might change as a result of this further deal?
Sainsbury’s and Asda suggest that little would change, from the customer’s point of view, apart from lower prices – expected to come in around 10% lower. Speaking on Radio 4’s Today programme this morning, Sainsbury’s chief executive Mike Coupe said that the two would not close supermarket branches or make redundancies. The new business envisages, the two said in a statement today, "a complementary network of more than 2,800 Sainsbury’s, Asda and Argos stores and several of the UK’s most visited retail websites, to create greater choice for customers through more store formats and channels, with a combined 47m customer transactions per week." This will create "a more competitive and more resilient business that will be better able to invest in price, quality, range and the technology to create more flexible ways for customers to shop."
Sainsbury’s chief executive Mike Coupe said: "This is a transformational opportunity to create a new force in UK retail, which will be more competitive and give customers more of what they want now and in the future. It will create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the UK economy. Having worked at Asda before Sainsbury’s, I understand the culture and the businesses well and believe they are the best possible fit. This creates a great deal for customers, colleagues, suppliers and shareholders and I am excited about the opportunities ahead and what we can achieve together.”
Roger Burnley, chief executive of Asda, which is currently owned by US giant Walmart, added: "Asda will continue to be Asda, but by coming together with Sainsbury’s, supported by Walmart, we can further accelerate our existing strategy and make our offer even more compelling and competitive."
Already, both supermarkets have well-developed multichannel retail capabilities that have been honed in a highly competitive grocery market. Sainsbury’s acquisition of Argos came out of the existing collaboration between the two around digital format stores in the supermarket’s branches: this was aimed at giving the customer a more convenient shopping experience, where they could buy, or collect, everything they needed on one single shopping trip. Today’s announcement extends this, envisaging Argos stores in branches of Asda. Perhaps in the future, should this merger win the necessary regulatory and shareholder approvals, customers might also see branches of Habitat in Asda and George clothing sold in Argos.
But it is in the future development of the connected store that the real strength of this deal would lie. By unifying existing systems, all these retail businesses should benefit from Argos’ expertise in delivery, collections and mobile shopping, and Asda’s wide experience around convenient grocery pick-ups, such as drive through click and collect. It will be ever easier to pick up shopping from a group that has more than 2,800 branches. As they are developed in the future, new innovations in areas from mobile to new store formats to the Internet of Things, will roll out across a larger group. That will extend the reach of their combined best practice and enable shoppers to see improvements in their experience faster.
Argos is an Elite retailer in IRUK Top500 research, while Sainsbury’s and Asda are Leading retailers.
Image courtesy of Sainsbury’s Argos