Sainsbury's has entered 2017 with new energy, ideas and a strengthened leadership team to drive the business forward.
1. Differentiating further through food quality
Expect Sainsbury's to invest further to make its food offer stand out from the crowd in 2017. Moving on from a three year programme to upgrade the quality of 3,000 own brand products, Sainsbury's is now embarking on 125 major range reviews that will touch 60% of food sales in 2017. Already in the opening weeks of the year there has been a flurry of activity with the launch of gluten free bread at its in-store bakeries and the addition of Chinese wines to its BWS offer. These new lines follow on from last year's launches of On the Go and Deliciously Freefrom and upgrades to its ready meals offer. Sainsbury's reasons that creating a more distinctive own brand offer will provide shoppers with unique reasons to choose its stores over competitors', and the heightened level of footfall these products generate should produce a halo benefit for brands across the store. Already there is data to suggest this strategy is working with Sainsbury's delivering ex-fuel LFL sales growth of 0.8% in Q3.
2. Engaging more shoppers and shopper missions
With shoppers increasingly favouring top-ups over full trolley shops at supermarkets and using Local stores more, Sainsbury's is taking action to be more relevant to smaller basket shoppers. A bold example of this new direction is the food dancing ads produced by newly signed agency Wieden+Kennedy. These directly target the food-for-tonight mission and young urban shoppers, in a clear break from Sainsbury's longstanding focus on the non-metropolitan, middle class family customer base. The fun and energetic ads build on work to make larger stores easier to shop for customers in a hurry, while also communicating Sainsbury's strengths in fresh and quality food in a more engaging way. For suppliers, this new approach should create greater demand for innovative and convenient products.
3. Delivering on value
Sainsbury's is committed to resisting cost pressures following Sterling's devaluation to maintain customers' trust in its price positioning. Having axed multi-buys and reduced promotional activity last year, everyday base prices now lie at the heart of Sainsbury's value credentials. With LFL transactions and customer satisfaction on an upward trend, Sainsbury's is keen to hold onto hard won improvements in value perceptions, and will target price investments in products that deliver the best volume responses. A particular focus has been health & beauty where Sainsbury's reported at its interim results that a sample basket was over 20% cheaper than two years earlier, making prices comparable with Aldi. With nearly two-thirds of shoppers believing that rising food prices will have the most impact on their financial wellbeing this year according to IGD's latest ShopperVista research, retailers have a clear incentive to ramp up communications on affordability. For suppliers, this heightens the need to work with Sainsbury's to identify ways to make processes more efficient and strip cost out of the supply chain.
4. Building online
Online has never been more important to Sainsbury's strategy, with the channel now supported by major investments and a more experimental ethos to unlock emerging opportunities. The retailer entered 2017 with major new capacity in the London area and a step up in growth to 9% in Q3, despite not driving sales through aggressive vouchering. Instead, progress reflects improvements to the underlying groceries online proposition with emphasis on the quality of the doorstep experience, product quality and freshness to drive incremental spend from loyal customers. Click & Collect is now available in over 200 supermarkets and over 30 stores now offer same day delivery ensuring Sainsbury's can compete with the rapid delivery options of competitors. Sainsbury's new grocery app is also gaining traction with customers, providing an important platform for suppliers to engage with shoppers.
5. Integrating Argos and Habitat
Sainsbury's most exciting opportunity in 2017 is undoubtedly embedding Argos fully into its business. While many pundits were sceptical about the logic for the acquisition, Sainsbury's confidence in Argos has never been stronger. Argos traded particularly strongly over Christmas with LFL over 4%, and its click & collect proposition should have a halo benefit for grocery suppliers as a programme of relocating Argos stores into Sainsbury's stores builds momentum. Argos concessions that have annualised achieved sales growth of 20-25% in Q3, as well as a 1-2% uplift across grocery. Beyond this, Argos presents many further opportunities, for instance as a sales channel for Tu clothing and Sainsbury's Bank, through the development of its Fast Track four hour delivery service and by realising the opportunity for delivering bulky items with its two man delivery service. Habitat is also a tantalising prospect, with clear overlap between its customer base and Sainsbury's and a proposition that has a natural fit with Sainsbury's existing homewares strengths.
Sainsbury's Trade Briefing 2017: With so much change underway at Sainsbury's, it is vital to keep up to date with the latest developments. Book your tickets now for the IGD Sainsbury's Trade Briefing to hear direct from CEO Mike Coupe and the senior team and find out how to grow your business with the retailer. For details and to secure your place, click here.