Sainsbury’s today set out how it plans to evolve to win in a ‘once in a generation’ time of change for the industry. Customers, it said, are turning online and to convenience stores and away from out-of-town stores as they shop more often – and supermarkets must adapt.
Sainsbury’s has concluded from a six month review of the business that supermarket sales will continue to fall in coming years – and today it reported half-year losses of £290m. It said it would prioritise investment in online and multichannel as well as convenience stores. That investment includes the opening of its first dark store, to open in 2016 at Bromley-by-Bow, as well as focusing expansion plans on convenience stores, which will make up more than half of its new openings in the years to come.
The news came as the supermarket reported a bottom-line pre-tax loss of £290m in the 28 weeks to September 27. Group sales fell by 0.1% to £12.7bn, while like-for-like sales were down by 2.1%.
Mike Coupe, Sainsbury’s chief executive, said: “Our strategy is evolving to address the continuing shifts in customer shopping patterns which we believe will lead to a greater emphasis on product quality and ease of shopping and an increase in multichannel shopping.
“We have examined every aspect of our business and we have good foundations for future growth in our supermarket and convenience estates, our online and non-food businesses and in Sainsbury’s Bank. However we need to make sure we are investing in the right areas and by reducing our costs and capital expenditure we are ensuring that we have the resources to enable us to do so.”
He added: “We are facing into a once-in-a-generation combination of cyclical and structural change in the industry, but I firmly believe that this strategy, building on our unique heritage and track record of success and delivered by the most experienced management team in retail will focus and energise our business to the benefit of customers, colleagues and shareholders alike.”
Reviewing the changing industry, Sainsbury’s said that the food and grocery products customers bought were largely the same as a decade ago – but the way they buy them has changed “significantly”. From the onset of recession in 2009, the accompanying squeeze in income saw customers buy more frequently, but buying fewer items each time as they looked to shop to budget and with less waste. The accompanying growth in supermarket space and improvements to online and convenience store shopping meant customers had more choice to shop in a way that suited their busy lifestyles.
“Using online and supermarket chanels to shop for bulky essential items periodically and then buying fresh products a couple of times a week from supermarkets and convenience stores gives customers choice and flexibility,” said Sainsbury’s in its statement. “Customers can decouple how they buy undifferentiated products from how they buy fresh, perishable, value-added products, giving them greater choice and saving time and money.”
The supermarket now predicts an increase in the number of customers buying for ‘today’, ‘tonight’ or the ‘next couple of days’. Conversely, the full weekly shop will decline: out-of-town supermarkets are under pressure as a result, while convenience and online are growing fast. Price remains important, and consumers may do those smaller shops in supermarkets just as much as online.
Sainsbury’s outlined a strategy in response that included focusing on quality and investing £150m on reducing prices in the second half of the year and the first half of next year. In the 25% of stores that are underused, it will look at opportunities to diversify. More than half the 500,000 sq ft of new space set to open each year for the next two years will come in the form of convenience stores, while new formats will be piloted for small, medium and larger supermarkets.
Its online business, which it says now covers 98% of households, will see a first dark store opened in 2016, in Bromley-by-Bow, while new ways for customers to order will be trialled, from click and collect in tube stations and other locations. The online platform has also been upgraded, with the customer experience improved.
