New Year, New Fight – Sainsbury’s vs Argos
You know you’re onto something good when people want what you’re having. Enough with the filthy minds! I’m not talking When Harry Met Sally – this week is all about a business takeover and in particular what those clever, consumer-savvy bods at Argos have been up to.
Just before the crushing hell that was Christmas shopping and the January Sales, I predicted that the UK was already over Black Friday – crystal ball working perfectly, thanks – and marked out Argos for great things.
Despite a premature profits warning that signalled difficult times for Home Retail Group – owners of Argos and Homebase – a modern rebranding of everyone’s favourite catalogue store to offer same day delivery and a wider range of technology products told me that good times lay ahead for CEO John Walden and his team – and it looks like I wasn’t the only one to have my interest piqued.
Mike wants what John’s having.
Sainsbury’s chief exec Mike Coupe had already welcomed Argos into a handful of his stalls in an attempt to boost Sainsbury’s non-food sales, but back in November he saw an opportunity to go one step further. One really big step, that is.
With the backing of his board, Coupe made a £1 billion offer for Home Retail Group. This might seem like a strange move considering that Sainsbury’s co-founded Homebase back in 1979 – but this wasn’t about a renewed interest in DIY. I’m pretty sure you won’t be seeing tins of Farrow & Ball on sale next to your avocados any time soon, because Coupe and his board only have eyes for Argos.
Why? There’s no getting away from the fact that Sainsbury’s have had their own recent struggles. Along with the other members of the UK’s ‘Big Four’ they’ve been steadily losing trade to those rascals at Lidl and Aldi for quite some time – and that’s something Coupe is interested in turning around.
A catalogue store is going to help him do that?
Yes – but they’re not just a catalogue store anymore. Argos’ recent investment in online sales and high speed delivery services mean that Sainsbury’s would have instant access to a high-spec digital presence that’s ready to rock – and there’s a shopping trolley full of reasons why that would be a good move!
First up, Home Retail Groups current profit issues and falling share prices suggest it’s a good time to buy – but it’s not just about that. Rumour has it that Amazon hasn’t given up its quest for total world domination and is looking to move into groceries – and with the food market in the UK already looking rather precarious, this is a move that any supermarket worth their baked beans would want to pre-empt.
It’s also true that Sainsbury’s is lagging way behind some other stores in providing non-food items and that’s a lucrative business to grab hold of. It’s got me thinking about why, when consumers are so comfortable with buying an ultra HD, curved screen 72 inch TV from Asda, very few of us would think of turning to Sainsbury’s for our entertainment needs.
This is how I see it.
Until recently, Sainsbury’s tag line was “eat well for less”. Yes, it has been altered to “live well for less” but it’s going to take more than one word to change how people see you. Sainsbury’s are known for quality food – not even value, just quality. And just food. Compare to Asda, who have always been known for value on a mind-bogglingly wide array of goods.
The consumer mind-set is simply not with Sainsbury’s selling things they can’t put in their mouths – so despite their Meta description on Google being “Supermarket chain offers on line shopping, DVD rentals, financial services and store locations” we’re just not buying into it right now. And that’s why acquiring Argos would be an epic coupe for Mike and the Sainsbury’s gang. Argos are known for everything Sainsbury’s are not – if you can’t change consumer’s minds, buy a business that’s already where you want to be. Instant rebranding.
So that’s great then, right?
Home Retail Group’s profits are on the slide, Sainsbury’s need Argos’ digital wizardry and brand perception. A match made in heaven. Well, not quite. Just like me, the board of Home Retail Group think that despite what their profits are saying, they’re on the up. And they told Sainsbury’s to come back with a better offer. Genius! Imagine going home and being able to answer the standard question of ‘what did you do today?’ with “Oh nothing much – turned down £1 billion…”
I love a business that has faith in itself. Argos have figured out what their customers want and have invested time and money into making sure it gives it to them. Their latest ad campaign screams top quality products, low prices and super-fast delivery. What’s not to like? They have confidence in their plan and are willing to give it time to reap some rewards. And any business that has the kahunas to turn down a £1 billion takeover offer is clearly telling customers that they’re a brand to be confident in. It’s even turned the takeover bid into great publicity for them.
In fact I’m sure it’s done Sainsbury’s some good too. Media coverage of the proposed takeover means that their commitment to being about more than just food might start to trickle into the consumer consciousness – and that’s exactly why Sainsbury’s went into this in the first place. So even if Coupe doesn’t return to Home Retail Group with a better offer, this is a rare case of everyone being a winner. I think you’ll agree that’s quite a nice way to start 2016.
Whatever your New Year business resolutions are, The Monachie Project is here to help. Just like Argos, commit to figuring out what your customers want from you and turn your business from good to great with our unique approach to consumer research consultancy.
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