Sainsbury’s needs to invest urgently in its brand

There was more bad news for the British high street this week as 60 Argos stores fell victim to our love affair with online shopping.

But behind this news is a deeper story. In the most competitive market in the world, Argos’s owner Sainsbury’s is losing out. Along with the Argos news, it announced a forecast £50 million fall in profits.

What’s going on? In recent years, its attention has been on trying to buy Asda, and on cutting its own prices – but not in investing in its brand. As Tim Ambler of London Business School once said, “a brand is an upstream reservoir of future cashflow”, and Sainsbury’s has let its reservoir drain.

The customer experience in store used to be impeccable, but these days is very patchy. Sainsbury’s is typically a little more expensive than rivals, but it often looks and feels cheaper. Of course, Sainsbury’s is not alone. In retail, there’s a very common vicious cycle, in which low margins mean cost-cutting, which means frumpy stores, which means even less loyal customers: a continuing race to the bottom.

Sainsbury’s has three different versions of its visual identity in use – something that perhaps worries only brand obsessives like me, but it does signal that there’s no urgency within the business to bring all its stores into line. Brand seemingly isn’t a priority.

In addition, Sainsbury’s seems to have lost confidence in its own-label brands. Packaging design no longer has any common thread, apart from an easily-missed ‘by Sainsbury’s’ logo, so there’s no cumulative brand-building effect. And its new low-cost pseudo-brands, like J James & Family, simply follow what rivals have done.

And that’s the point. Sainsbury’s used to lead, and now it’s following.

So how does a business like Sainsbury’s turn this round? How do you invest in brand?

Advertising of course plays a role – but, to my tastes at least, Sainsbury’s current campaigns are dad dancing. They’re original and eye-catching, but they don’t reflect the essence of the brand.

And anyway, advertising is no longer the most effective way to build a brand. As all retailers now know, consumers believe the reality, not the image, so you have to invest in better products, better service and a better end-to-end customer experience. The secret is to be fanatically consistent – like Pret A Manger or Apple or even Primark.

This depends on the people who create that experience. There’s a well proven theory called the service profit chain, which at its simplest says that happy staff make happy customers, who make happy shareholders. There’s a sharp division between retailers with happy staff, like Lakeland, and those with disaffected employees, like my recent experience of B&Q. Decent pay is of course part of the story. But so are a sense of purpose, training that gives people a feeling of mastery at their job, and culture that trusts employees to do the right thing. At the US retailer Nordstrom, staff are given only one rule: ‘Use good judgement in all situations.’

To push a reinvestment in its brand, Sainsbury’s needs to be crystal-clear about who it is and what it’s for – to rediscover its identity. To remember its past, but more importantly to work out its role in our future lives. It needs once again to lead.

Sainsbury’s became Britain’s biggest grocer back in the 1920s. It pioneered the idea of self-service supermarkets in the 1950s, and dominated the market in the 1980s. The company brought quality to the many, at a fair price. It commissioned the best architects to design its stores. It was the model for the sector.

Can Sainsbury’s now lead us again? Our eating habits are one of the main causes of the climate crisis. Can Sainsbury’s lead us – rapidly, and on a massive scale – into a step-change in plant-based food, in low air miles, in zero packaging? Even more broadly, into consuming more wisely, even consuming less?

It’s good news that Sainsbury’s is now spending money on its stores. Though it’s closing 15 big stores, it’s also opening 120 new Sainsbury’s Locals. And its newest stores look good. But there’s a lot more to do. Rediscovering a sense of purpose, pride and leadership. Rekindling the talents of its own people. Remodeling the customer experience. The current sales figures are disappointing, and the company’s current brand-building plans may be too little, too late.