Sainsbury: catering for savvy shoppers boosts sales
Published:15-May-2009
By Staff Reporter
For the 52 weeks to March 21, 2009, Sainsbury's total sales increased to GBP20.4 billion, up 5.7% compared to 2008, and 4.5% on a like-for-like basis. Sainsbury's innovative campaigns and range architecture are catering well for the frugal consumer, while long-term plans are laying solid foundations for future growth.
The hard work done by Sainsbury to enhance its universal appeal and price perception is clearly paying off. In addition to the GBP450 million invested in price positioning, much of Sainsbury's success must be credited to the enhancements made to its range architecture which, capitalizing on its strong quality proposition and the high levels of trust in its own label products, continues to strengthen its universal customer appeal and cater well for all consumer budgets.
While its Basics range has been expanded and now accounts for 3% of total sales, it is not just in offering value and catering for the trend in trading down that Sainsbury has excelled. The retailer understands how best to cater for the changing consumer psyche and shopping behavior. Its innovative campaigns such as 'Shop and Save', 'Switch and Save', and 'Cook and Save', are extremely successful in meeting the demands of the frugal consumer who is looking to save money without sacrificing quality or their core values. The campaigns serve the numerous trends: the demands of shoppers on a tight budget, those looking to cook from scratch, and those wanting premium meal solutions to replace takeaways or dining out at restaurants. In addition, Sainsbury has recognized that ethics remain important and is reinforcing welfare, fair trade and environmental issues.
It is not just in food that Sainsbury is excelling. The supermarket has seen 25% growth in its online grocery sales over the last year, and non-food now accounts for around 15% of total sales. Although the grocer will have no doubt benefitted from the demise of general merchandisers such as Woolworths and people trading down to the supermarkets, at the heart of Sainsbury's success in non-food is its TU range. Boosted by incremental space expansion, total TU clothing sales now annualize at GBP500 million. With non-food going online in the second half of 2009, and over half of new space being dedicated to the category, there remain substantial growth opportunities for Sainsbury in non-food, especially in utilizing the TU brand.
In addition to broadening its appeal, Sainsbury is expanding its geographical reach. A particular growth opportunity has been indentified in the convenience market in which, following the acquisition of 24 Co-operative stores, the grocer is intending to open 50 new stores in 2009/10 and 100 in 2010/11. By expanding its number of convenience stores, Sainsbury is capitalizing on the strong growth opportunities that neighborhood and town center retailing provide, while gaining greater exposure to currently underrepresented areas, such as Scotland, providing a further fillip of growth going forward. Overall, the supermarket is aiming to increase space by 12% over the next three years, adding approximately 750,000 to 800,000 square feet a year. Although this is ambitious in a sector that adds up to two million square feet a year, with a pipeline of space able to deliver 5% per annum on an ongoing basis, this is achievable. Sainsbury has identified larger, more effective store extensions and will be able to exploit the changing environment for growing space, exploiting a weak property market, while picking up an increased amount of suitable vacant space from collapsed retailers.
Although the economic climate is set to deteriorate further and the competitive environment will intensify, Sainsbury is looking at both the short and long term with its growth strategy. In the short term, its broad appeal, ability to cater for all consumer budgets, and renewed value credentials make it very well positioned to continue achieving strong growth in what will be a very challenging year. Further ahead, concentrating on enhancing channels and physical expansion, while remaining focused on consumer psyche, will ensure that long-term growth can be built on the solid foundations laid down by the 'Making Sainsbury's Great Again' strategy.
