If anyone counted the number of times Sainsbury’s chief executive Mike Coupe said “challenging” in this morning’s conference call, I suspect they would have got well into double figures. The talk of “challenging conditions” and a “challenging market” emerged as a definite theme as Coupe announced this year’s annual results.
Looking at the figures, it’s clear to see why this was the word of choice. Sainsbury’s profits were down for the third year running and its like-for-like sales were only bolstered by a growing Argos. Plus the growth of the discounters shows no sign of slowing, as this morning’s Kantar figures testify.
The results seem to have convinced Argos naysayers of the value of the acquisition. But a new line of criticism is now emerging: that Argos is essentially a lifeboat for a drowning Sainsbury’s, which is struggling to buoy up its food sales. Granted, its supermarket sales were down 2%. And like-for-likes were down 0.6% across the business, suggesting its growth in online and convenience channels isn’t yet making up for that shortfall.
’Changing shopping habits’
But Sainsbury’s may well reap a long-term gain from this short-term pain. Coupe makes no apologies for adapting the food business to “changing shopping habits”, which has meant a large upfront investment in online. Last year, it was the first major retailer to launch a one-hour delivery service in the form of Chop Chop, currently being trialled across London. It is also in the process of testing a same-day home delivery service, which seems to be rapidly gaining geographical coverage. And by all accounts demand is strong – one Sainsbury’s store manager this week told The Grocer that same-day orders were increasing weekly to now account for 10% of all online transactions.
This percentage is likely to continue on an upwards trajectory. Coupe has been clear in his belief that speed is “the currency of the market” in online. This may not be paying big dividends at the moment – though Coupe stresses its online division is profitable – but it could prove a crucial point of difference in the near future.
As online grocery is forecast to be worth £17.6bn in the UK by 2021, gaining the loyalty of these customers would be no small win for the supermarkets. Plus, it will be an important point of difference against the internet-dodging discounters. So though Sainsbury’s may be under the cosh at the moment for its falling supermarket sales, it may soon reach a tipping point where its online investment starts to pay off. And when that happens, the rest of the big four will be playing catch-up.
No comments yet