Knowledge Bank Blog, Channel Execution

Netto and Sainsbury’s : Our Take On It

Winning in a market in which Discounters are winning.

Since we last wrote about Discounters, the Sainsbury’s and Netto venture has been announced, with further details about target sites released last week.

So, why have Sainsbury’s chosen to do this?  Is it an exercise in best practice for logistics, efficiency and buying?  Does it make it easier for Sainsbury’s to make profit from sites they own but have not yet developed? Or is it simply to get a foothold in a growing sector?

Well it is probably a combination of these things.  However, 15 trial stores is a very small foothold in a rapidly expanding sector, where Aldi & Lidl have hundreds of stores and very aggressive store opening plans.  So, we think there is another very good reason for Sainsbury’s to do this.  It will make them much better informed than their biggest competitors about the Discount shopper’s needs and behaviours.  Better information leads to better understanding of how Discounters are winning, which leads to being better able to defend against them.

As Sainsbury’s start getting access to sales data and Discount shoppers, we wouldn’t be surprised if they begin tapping into a number of the tactics that Discounters have successfully deployed to gain shoppers and spend.

For instance, will they start editing choice? Removing range duplication within price tiers and across brands in order to make shopping much easier.

Will they be using brands as decoy products in order to highlight the excellent value of own label products?

Will they utilise awards and recommendations, or communicate more quality and provenance messages, to reinforce trust in the quality of their products?

Will they learn more about everyday low pricing?  Will they reduce promotional complexity and move to a simpler pricing and promotional strategy?  Something they have already been taking steps towards in recent months.

The Netto stores will be a great test bed for these ideas, or others like them.  They offer a relatively low risk opportunity to trial things, learn what works, and potentially reapply across the main estate.

There is no doubt that the rules of the game for supermarkets and brand owners are changing and will continue to change quickly.  As they do, Sainsbury’s will have at least one advantage as they battle to survive and thrive – a close up view of the Discount shopper.

How they use that advantage could have some quite significant implications, for those competing against them and those seeking to win with them.

Have a great weekend and speak to you next week.