This week we learnt that two of the UK’s top supermarkets are merging, shaking up grocery shopping for generations to come. The £13 Billion merger between Walmart-owned Asda and Sainsbury’s, which recently bought out Nectar, is set to create a grocery powerhouse that can finally compete against Tesco Stores.
Following the announcement shares rocketed and the public was happy to hear prices would receive a 10% cut as a consequence of the merger. Rpeorts indicate no jobs will be cut, nor will any stores be closed. So what is this merger all about?
Finance Monthly spoke to Dr Naaguesh Appadu, Research Fellow at Cass Business School and member of the Mergers & Acquisitions Research Centre, who comments on Sainsbury's and Asda agreeing to £13bn merger.
Dr Naaguesh Appad said: “This deal is about market share. Neither Sainsbury’s nor Asda can afford to stay quiet. You just have to look at the grocery sector right now: Tesco has acquired Booker and Morrisons supplies products to Amazon. Therefore, it is key to show the leadership in terms of groceries for the Sainsbury’s/Asda merger to happen. It should be noted that they neither company can grow organically, and they don’t have the option of staying away Tesco, from the current market leader.
“This deal with see the consumer win two-fold. First, customers will be able to access more products and second, they’ll enjoy lower prices (execs have stated 10%) on common products due to competition on suppliers. It will be interesting to see how this plays out in terms of competition, now that executives have stated there are no plans to close Sainsbury's or Asda stores.”
Recent reports indicate some of the biggest household brands have signed up to a new buying service, by which grocery bills could be cut up to 30%, and the need for supermarkets could be eliminated completely.
Companies such as Unilever, Mars, and Reckitt Benckiser have signed agreements to sell directly to their consumers via a new digital platform and tech company, INS. This could also have a direct impact on how brands are able to use customers’ data for loyalty scheme and rewards.
Here, Rob Meakin, Managing Director at Loyalty Pro, comments for Finance Monthly: “The move by brands to offer a more convenient, cheaper service to consumers and cut out supermarkets is a clear attempt to gain some of the market share – and power – of grocery leaders like Tesco and Sainsbury’s and now Amazon, of course. In being able to gather data from their customers more easily, brands are going to create recommendations, rewards and loyalty schemes based on consumer buying patterns. With consumers’ allegiance shifting more away from brands and towards service (same-day and even same-hour delivery), this is an opportunity for brands to reclaim customer loyalty and our advice to retailers is to watch this development very closely and make sure they are prepared to fight for their consumer.
“As data becomes the fuel for any business, retailers need to be actively trying to grow their customer loyalty by utilising the customer data at their fingertips to offer rewards schemes in the same way brands are now likely to. Loyalty points and rewards are a currency themselves, and with household budgets squeezed, consumers will be looking for the best possible deal. They also want to feel valued wherever they shop, rewarded for their custom and loyalty through points, offers and even charitable donations. We live in a society where loyalty can appear dead, but the truth is that it’s simply changed. Consumers still value great service and that can absolutely be delivered by anyone – from a single store high street retailer to a multinational online service. The key is to use data to understand what they want and deliver an experience using personalised and relevant communications which will encourage customer loyalty. With brands about to cut out the middle-man, no retailer can afford to rest on their laurels.”
In 2017, Aldi announced they were planning on becoming a major competitor in the US grocery store market, investing a mind-blowing $3.4 billion into current and future American endeavors. If you don't have an Aldi near you now, one might be popping up soon. So, what can you expect? Here's the fascinating history behind this up-and-coming US chain…