Justin King says this time it will be different. Will it really? Amy Balchin searches for evidence
If you expected a bold change in strategy from Justin King this week you will have been sorely disappointed. “This time it will be different,” the Sainsbury chief executive declared, but his recovery plans boil down to little more than sticking with the present strategy but implementing it more effectively.
King said Sainsbury would reinforce its point of difference by aiming for exceptional quality while driving sales by bringing down prices. “I am absolutely sure we can drive on in terms of our quality,” he said. “It is in the DNA of our business. Our quality is better than Tesco and Asda, but not good enough. I do not see why we cannot beat M& S and Waitrose - we are three times the size of them put together.”
One analyst was unconvinced. “King says this time it is different, but why? There is nothing tangible here. To drive sales they will have to reduce prices and pay for margin reductions through cost efficiencies - but I doubt whether they can achieve this. They may be price-competitive going forward but others will go further.”
Suppliers add that they will not be bailing Sainsbury out. The retailer has requested 1% off net invoice price as it attempts to reduce its cost base. But while suppliers will resist this cut, they do see the overall strategy as realistic. According to one: “King has to start somewhere. He is saying this is the bottom and we are now heading upwards. It does sound plausible.”
Another adds that Sainsbury is still viewed as a valued customer. “They still have a significant share of the market and are important.”
Supply chain director Lawrence Christensen has told King there are no problems he has not seen before. Granted, he went on to say he had never seen them all in the same place at the same time, but at least the company can begin to tackle these issues.
Consolation is to hand also in that Sainsbury is finally getting to grips with IT. Half of its availability problems have been caused by inadequate in-store systems. Shelves are left empty and floor staff forced to input goods manually. Ineffective systems like this are being ditched.
So King’s announcement certainly did not deliver a bang, but it would be unfair to say it was merely a whimper. As another analyst says: “They are not offering anything particularly revolutionary, but it is not as though the food industry is a new one. The approach of differentiating by quality, choice and service makes sense. There is much to be said for simply doing things well.”
King's to do list
>> Sainsbury's plans to 'fix the basics' byt the start of 2008
If you expected a bold change in strategy from Justin King this week you will have been sorely disappointed. “This time it will be different,” the Sainsbury chief executive declared, but his recovery plans boil down to little more than sticking with the present strategy but implementing it more effectively.
King said Sainsbury would reinforce its point of difference by aiming for exceptional quality while driving sales by bringing down prices. “I am absolutely sure we can drive on in terms of our quality,” he said. “It is in the DNA of our business. Our quality is better than Tesco and Asda, but not good enough. I do not see why we cannot beat M& S and Waitrose - we are three times the size of them put together.”
One analyst was unconvinced. “King says this time it is different, but why? There is nothing tangible here. To drive sales they will have to reduce prices and pay for margin reductions through cost efficiencies - but I doubt whether they can achieve this. They may be price-competitive going forward but others will go further.”
Suppliers add that they will not be bailing Sainsbury out. The retailer has requested 1% off net invoice price as it attempts to reduce its cost base. But while suppliers will resist this cut, they do see the overall strategy as realistic. According to one: “King has to start somewhere. He is saying this is the bottom and we are now heading upwards. It does sound plausible.”
Another adds that Sainsbury is still viewed as a valued customer. “They still have a significant share of the market and are important.”
Supply chain director Lawrence Christensen has told King there are no problems he has not seen before. Granted, he went on to say he had never seen them all in the same place at the same time, but at least the company can begin to tackle these issues.
Consolation is to hand also in that Sainsbury is finally getting to grips with IT. Half of its availability problems have been caused by inadequate in-store systems. Shelves are left empty and floor staff forced to input goods manually. Ineffective systems like this are being ditched.
So King’s announcement certainly did not deliver a bang, but it would be unfair to say it was merely a whimper. As another analyst says: “They are not offering anything particularly revolutionary, but it is not as though the food industry is a new one. The approach of differentiating by quality, choice and service makes sense. There is much to be said for simply doing things well.”
King's to do list
>> Sainsbury's plans to 'fix the basics' byt the start of 2008
- Availability - drive volume, improve forecasting, simplify range and promtions, introduce new stock management procedures
- Supply chain - new management, review automated depots and add manual support
- IT - slow down roll-out of new systems, simplify and improve systems, £140M it write-off, Sainsbury's to You put on hold
- Customer offer - make range relevant to customers, simplify range heirarchy with core offer in all stores, invest in price and quality
- Store operations - recruit 3,000 shop staff, refurbish 131 stores
- Organisation - 750 jobs to go at HQ. No move from Holborn
No comments yet