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Sainsbury's commercial boss offers digital food for thought

Sainsbury’s in-store, scan as-you-go Smartshop technology is set to become much more personalised with increased functionality over the coming years, judging by comments made by the grocer’s commercial director for food on Thursday (7 November).

Paul Mills-Hicks, who was talking at IGD Live, a grocery conference, suggested Smartshop – which already exists in 350 Sainsbury’s stores across the UK – is on a path to greater sophistication.

Reiterating and building on points already made in the public arena by the Sainsbury’s digital team, he mapped out a Smartshop future where users receive personalised offers, directions to products in the store, customer reviews, and tips and advice – all on the one platform.

“Digitising the physical journey – that’s where I think the revolution in our industry comes over the next three years,” he told delegates, adding that Smartshop “will keep iterating”.

“It is going to radically change our business model."

A digitised version of loyalty scheme Nectar – which Sainsbury’s acquired in 2018 – was launched in October, and Mills-Hicks views it as central to supporting this future technological direction for the retailer, driven in stores by Smartshop.

“Think of all the data we have, about what we could do matching products to that first scan,” he mooted.

“We talk about disruption; we talk about inspiration – how much further could we go with that digital journey that is in the shop?”

Mills-Hicks was talking on the day Sainsbury’s announced its interim results for the 28 weeks to 21 September, which showed that group sales – which include Argos and Habitat – were down by 0.2% to £16.8 billion. Like-for-like trading was down 1% year on year, but profit dropped dramatically.

As the retailer set out during its Capital Markets Day at the end of the summer, a review of its store estate has led to property write-off costs totalling £203 million which were represented in this half-year trading.

Total one-off costs of £229 million resulted in statutory profit before tax dropping to £9 million compared to £107 million for the same period last year.

Online grocery sales jumped by 7% year-on-year over the half-year period, and eCommerce now accounts for around 8% of all grocery sales at the retailer.

In his wide-ranging presentation, Mills-Hicks’ only mention of the interim results was that he was “happy” it had resulted in the business’s share price edging up close to 1% in Thursday’s trading.

During the session, he emphasised the importance of developing and selling food products that stand out for customers in what is effectively a marketplace where three-quarters of items are “very commoditised”.

“The real opportunity is in the one in four opportunities bought for those special moments – Christmas, birthday parties, family celebrations, when communities come together,” he noted.

“When we add value to our customers’ lives, we are rewarded with more gross margin for [brands and manufacturers) and us.”

As a result, Sainsbury's is seeking product innovation from large and small suppliers alike. He said a recently launched range of goods with food chain Leon has seen initial success, offering something new that does not cannibalise its existing range.

This quest for newness and customer value has also led the business to move further into the beauty space over the last year, with the addition of several new lines and store formats. Mills-Hicks said this is all part of a shift to changing the in-store experience offered by its supermarkets to inspire visitors and offer something different.

“The only way to avoid a race to the bottom, [and] the only way our businesses together have a sustainable future is you’ve got to add value to the customer,” he explained.