Sainsbury’s is now a year into its ‘food first’ strategy and the shift in focus is evident in its latest trading update where grocery sales are good and general merchandise is left behind.
The company blames tough year-on-year comparatives for weaker non-food sales yet given that quite a few other retailers have reported a decent Christmas, one wonders if Sainsbury’s-owned Argos has made a few mistakes and more attention is needed to the brand.
Supply chain issues are one factor behind a double-digit decline in technology, gaming and toy products. Another factor is the decision to focus on profitable sales and cut back on promotions. That might protect profit margins but equally Argos has a reputation for having attractive prices so Sainsbury’s is taking a bit gamble with its new strategy as it could see the loss of customers to rival operators.
“If people now associate Argos as being less competitive on pricing, they might cease shopping with the brand full stop. Against these concerns, the core food business is doing well,” AJ Bell’s Russ Mould said.
“For years Sainsbury’s has been stuck in the middle. Its products have more expensive than Aldi, Lidl, Tesco and Asda and so the value shopper hasn’t seen Sainsbury’s as a desirable place to buy food and drink. Equally, people seeking a higher quality product have preferred to go to Waitrose or Marks & Spencer.
“The new strategy is to become more competitive on pricing is now winning over some of the value-seeking shoppers, while a big focus on product innovation has seen it roll out some higher quality items which look to have been a hit with people looking for something fancy to put in their basket.
“Sainsbury’s needs to sustain momentum with this trend, which will not be an easy job given how all the other supermarkets are constantly tinkering with their formula to try and stay one step ahead of the competition.”