Our website uses cookies

Cookies enable us to provide the best experience possible and help us understand how visitors use our website. By browsing Essential Retail Magazine, you agree to our use of cookies.

Okay, I understand Learn more

Sainsbury’s-Asda merger: A new retail tech powerhouse?

The shock Sainsbury’s/Asda announcement throws up many questions. Chief among these being, how will the move affect technology investment? As Sanjay Bailur, managing director, AlixPartners, puts it: “The combined business will need to work hard to reap the rewards of a 2,800 store footprint across the country. We can expect a review of the supply chain and investment in e-commerce and management will need to monitor costs closely if it is to challenge the dominance of Tesco.”

According to various industry commentators, the tie up proves the retail landscape has changed forever, with omni-channel consumers becoming more fluid, wanting both quality and low cost. “In today’s retail market, technological innovation is a key differentiator. All the big players are engaged in a race to see who can develop the best supply chain and omni-channel experience to drive efficiency and customer engagement,” says Daniel Saunders, chief executive, L Marks. 

“Whenever you have merger activity, particularly one as significant as Sainsbury’s/Asda, then driving tech synergies and pooling investment will always be a key part of the equation. Both companies will have developed a huge amount of IP and know-how, so combining this expertise will be a huge competitive advantage.”

Some of the areas with the biggest opportunities for synergies and shared learnings are same-day delivery, reducing friction at checkout, data and customer loyalty. Natalie Berg, founder, NBK Retail, flags up the key role here of Argos, which Sainsbury’s bought in 2016.

“We often think of Amazon as winning the fulfillment time wars but Argos can reach 90% of UK shoppers within just four hours. That’s a very compelling proposition in today’s retail climate,” she says. “Over Christmas, they very bravely promised shoppers they could order as late as 1pm on Christmas Eve and still receive their gifts in time. No complaints as far as I’m aware so they’re obviously doing something right.”

Argos has been a star performer for Sainsburys. It recently announced an increase in full year underlying profits before tax to £589 million, driven in part by delivery of Argos synergies. Walmart will be keen to exploit this both in Asda stores and internationally, Berg believes.

Leveraging physical assets

Other potential advantages include putting automated Click & Collect towers in Sainsbury’s stores, along the lines of those rolled out Stateside by Walmart. Whilst the Asda Toyou service (third party retailer Click & Collect/returns, for instance, Asos and AO.com) could also be brought into Sainsbury’s, although the latter isn’t as exposed to the large superstore channel as Asda so there is less dead space to fill. 

As such, a move might cannibalise the Argos offering. “It might make sense for them to focus more on returns than collection, which is still a trip driver. In fact, maybe even Amazon returns? It would be bold but effective,” says Berg.

She adds: “They’ll be very focused on how to leverage their physical assets to drive online sales. Structurally, Argos is the best positioned retailer in the UK to take on Amazon. Their showroom model was ahead of its time; Argos were doing Reserve & Collect well before it became fashionable.”

There will also be an effort to reduce friction in-store. Both Sainsbury’s and Walmart in the US have prioritised the checkout experience, working towards a completely queueless system, for instance, Smartshop. Amazon Go has been the catalyst, of course, although Sainsbury’s were circling this area way back in 2015. 

New approach to data

Then there is the tricky issue of Nectar. One of the greatest challenges the mega-merger poses is how the new retailer uses one of its biggest assets – data. “My guess would be Nectar gets rolled out across Asda (in addition to Argos, Habitat), despite Asda historically shunning loyalty cards. But there must be a move away from pure point-based cards,” says Berg.

Mark Hinds, CEO, Polymatica, observes that Sainsbury’s recent acquisition of the Nectar scheme shows it clearly values customer information – not to mention every other source of data in the business. “With a combined pool of customer data numbering in the tens of millions of shoppers, the new retailer will need to ensure its data is truly usable on-the-fly,” he says.

This means investigating entirely new ways of interrogating the data. Not only to make it accessible in real-time, but to provide access to regular employees who can combine their own business knowledge and experience with savvy use of data to transform business effectiveness.

“Regardless of their data science experience, workers across an organisation must be able to quickly derive answers from data. Otherwise the new retailer will certainly be a behemoth. But like a behemoth, it will be slow moving and ultimately vulnerable to more agile competition,” Hinds concludes.

What’s Hot on Essential Retail?