Cost cutting claim crap
In perhaps the biggest retail news in recent times, plans are afoot for a £13 billion merger between supermarket giants Sainsbury’s and Asda.
Yes, it seems that Walmart have been disappointed with their acquisition. So, they are happy to offload it to Sainsbury’s for just £7.3 billion, pocketing a mere £584 million more than they paid for Asda some 19 years ago.
Sainsbury’s clearly see the potential of the coupling though. And no wonder…
The combination would be a Goliath of a retailer, employing more than 330,000 people across 2,800 stores.
The merger would also push Tesco off the UK grocery market top spot, giving Sainsbury’s-Asda a 31.4% market share with an annual turnover of £51 billion.
Yep, it’s definitely not to be sniffed at!
And because of the power they would garner, there is some talk that the deal is likely to be blocked by the competition watchdogs.
Though Mike Coupe, the CEO of Sainsbury’s, says there are many compelling reasons as to why the Competition and Markets Authority (CMA) should allow the deal to pass.
Firstly, both Sainsbury’s and Asda have substantial non-food operations and compete with non-grocers such as Boots and M&S, as opposed to just the likes of Tesco.
Secondly, he could play the ‘Tesco took over Booker cash-and-carry card.
Then, of course, there is the case for the massive disruption in the grocery market caused by not only the relentless rise of online shopping at the expense of traditional bricks and mortar stores, but also the rise of the German hard discounters, Aldi and Lidl.
What’s in it for consumers?
You may wonder why Aldi and Lidl are even mentioned as part of the equation.
Surely they are on a completely different playing field to the likes of Sainsbury’s, Aldi and Tesco?
Well, they may be at the moment if the mega-merger goes ahead, Mr. Coupe plans to bridge the gap with a pledge to cut the price of everyday household items by 10%.
Yes, that’s right. 10%. A public target set by a chief executive.
Don’t get me wrong, it would be a highly emotive end user experience if it was to happen. I, for one, would be dancing in the aisles.
But can we believe him?
Let’s face it…. A retail giant pledging customer perks is tantamount to a politician making promises. It really is. They hate being held to fortune.
Of course, Mr. Coupe may just be spouting such wild claims to show the consumer and competition watchdogs that the merger will be pro and not anti-consumer.
But surely he’s not that stupid to believe people won’t hold him to it?
Customers are like dogs with bones when they get offered something that’s of benefit to them: they don’t like to let go. We only need to look at Black Friday mania to see that.
So there’s no way that anyone is going to forget what he said if the deal goes through.
And I certainly wouldn’t like to be on the end of the customer feedback line for Sainsbury’s-Asda if he doesn’t deliver on his promises.
He’d be delivering an emotive consumer experience based on all the wrong emotions!
In the money
Of course, a lot can happen in 18 months (the period over which merger discussions are taking place).
I can just see it now. ‘Yes, you are saving 10%, it’s just that inflation has put prices up by 15% over the past couple of years.’
Really, this is the sort of nonsense these people spout.
Because, let’s face it, who really benefits?
It’s not going to be the suppliers. They are probably most at risk from job cuts.
Because Mr. Coupe expects to save at least £350 million a year in a bid to pass on the promised 10% savings to consumers.
(That figure was apparently reached by comparing the list of goods sold by the two retailers and, where there identical products exist, applying the cheaper price).
So he will doubtlessly be beating up suppliers on price to help keep costs down, which could impact the
So perhaps it will be the employees that get lucky from the union? Mr. Coupe has promised that there won’t be any in store job losses.
Of course, one thing we know for sure that the powers that be will definitely be in the money… a successful mega merger can only line the coffers of the likes of Mr Coupe.
In fact, he was even caught singing about it. Seriously!
The tune, from the musical 42nd Street, seeped from Coupe’s lips and was caught on camera whilst he was waiting to be interviewed about the proposed merger deal for ITV News.
Mr Coupe apologised for his faux pas. And then tried to convince people it was because he had seen the show last year.
Oh come on mate, pull the other one. I don’t care that you play the guitar and have done so in front of thousands of Sainsbugs employees. Or that singing is your way of composing yourself.
I watch Eastenders at least three times a week and barely remember the theme song, never mind burst into a rendition of it at inopportune moments!
I bet he was mentally planning a Caribbean cruise too. Or maybe even dreaming of the prospect of purchasing an entire Caribbean island!
Dividing the crowd
At the end of the day, the only people that will really and truly benefit 100% are those at the top of the tree.
Yes, customers might be pleasantly surprised and consumer satisfaction levels may be high. Especially if they deliver on the promised discounts and that a bottle of coke costs the same in both Sainsbury’s and Asda.
But not everyone is going to be happy.
I know many people that shop at both stores.
But I also know people that only shop at Asda because they think Sainsbury’s is too expensive.
And then there are those who refuse to shop at Asda from a status perspective and will only grace the aisles of Sainsbury’s!
So someone, somewhere, will be disappointed if the merger goes ahead, regardless of wild discount claims.
Of course, as ever, there is a lesson in this for all of us.
First of all, don’t make over-enthusiastic promises if you’re not sure that you will be able to keep them.
And secondly, remember that you can’t please all of the people all of the time.
Instead, focus on pleasing most of the people all of the time by delivering what your customers want when they want it!
Talk to us here at the Monachie Project and let us deliver focused user experienced consulting. Let us help you understand your business from a customer perspective.
And for goodness sake, be a little more sensitive in your choice of song if you’re going to start singing.