Sainsbury Management – White Knights or White Elephants

Sainsbury’s has reported a pre-tax loss of £72m for the 52 weeks to 14 March, the retailer’s first loss in ten years.

A Fish running out of Water

A Big Fish running out of Water

While property writedowns accounted for the bulk of the retailer’s losses, like-for-like sales (excl fuel) were down 1.9% as competition from discount retailers Aldi and Lidl continued to hit margins.

The retailer opened 98 convenience stores during the year and recently announced that it will be opening two digital hubs in London and Coventry.

Sainsbury’s chief executive Mike Coupe said: “The UK marketplace is changing faster than at any time in the past 30 years which has impacted our profits, like-for-like sales and market share.

“However, we are making good progress with our strategy, and our investment in price and quality is showing encouraging early signs of volume and transaction growth.”

What do they say they will do?

They have announced a sspog initiative that will put more product where it is needed. Tesco, of course, have had this for a while. However, it has not prevented the often horrendous out of stock they have started to address by putting more people in place to move the product, and reducing the number of lines.

Mike Coupe has, however, ruled out this kind of range reduction (but never say never). At a stroke, therefore, ensuring that the best he can do in any particular store, is tinker round the edges.

They will be increasing their ranging of Tu clothing, against a background of real competition in fashion online and by specialists who offer a large range just down the road. As well as concessions with retailers such as Jessops, who have already failed once on the High St. Pass me the wallpaper, adhesive and crack filler please.

Will this be enough?

Personally, I doubt it. Sainsbury data initiatives have a history of being clunky and very very late. Their on line store by store data – the Big Button, variously arriving on a Tuesday, any time in the week, or, indeed, not at all on occasions, is by far the least user friendly of the majors. If you don’t get it one week, it is gone forever.

For many years they have been flagging intention to change, and discouraging brands from accessing it.

Sainsbury don’t tell you which stores you are ranged in. It’s a secret. The only way you can find out is to track where the initial allocation goes, for which, of course, you need store by store data from Big Button.

Data is either a good thing – or a bad thing. Make your mind up time.

A recent off sale initiative they launched, CAM, is intended to focus on products that are there – but not selling. However, as a manager commented to me, “if you can’t measure it, and you can’t bonus for it, how well do you expect it to be implemented?”

Of course, Sainsbury are renowned for top down management, and resisting all attempts to get feedback from the base. So the comment I just passed on would quite possibly get someone fired. If you, as a brand owner, go into any store to ask any question of a manager you will find yourself referred to a faceless central person for comment.

All of which bespeaks a retailer absolutely confident  that no form of external, informed, comment or suggestion would, in any way, improve the way they approach their customers, and their business.

What would help?

For a start they need to have an internally generated set of standards that everyone is signed up to.

In the Dear Colleague for the 6th May Mike Coupe comments “….we’ve had a really encouraging start. We had a good Easter, and sales of Easter Eggs were strong. We  also managed to retain great availability long after our competitors”.

How much better would this have been if he had said “But we recognise that is not good enough for our valuecustomers, so together – and with a new supply chain initiative –  we aim to do much better next year”.

This year, yet again, out of stock on Eggs hit the nationals.

You need to have a set of values customers and colleagues sign up to, that offer a better experience than anywhere else. Here you need a clear view on how unacceptable the lack of any one product – in particular on offer – is to your core.

Given that 40% or more product is sold at a discount – but typically only 20% of space is flexed (and often only if you pay for it) the tinkering round the edges approach may unravel without local range reduction (not necessarily national).

A very simple example. In a local mid sized Sainsbury they have a KTP canned tomato in the ethnic aisle selling at 10p less than the Sainsbury own brand around 5 steps away. In turn this is selling for significantly less than some Napolina varieties on the same shelves. That’s 3 products. Take out the own brand, have the ethnic ranged in two areas and you still cover the market. And, with Ramadan coming on, you increase the likelihood of making the bulk sales that are common. Given the ethnic nature of this area, that is a ranging change that would increase availability, without impacting in any way on choice.

Silo and top down ranging impacts on the discounters much less. Reduced ranging lessens the burdens on buyers, so they can oversee a much wider area. Supply chain is much less complicated.

If Sainsbury want to make a difference for their customers they need to shake up their ranging in a much more fundamental way than they have just announced.

Oh, and encouraging well meant feedback from down the line and external commentators would be a good start.

So recognising, as Tesco do, that once in a while, their managers might be able to make a difference at store level requires simply that you trust them. And of course, establish that all important shared set of shopper-based values.