As retailers reinvent physical stores, brands must align capabilities with new requirements to win in this space. PlanetRetail RNG recently met the Sainsbury’s senior leadership team at its refurbished and extended Redhill store to understand how the UK’s second largest grocer is reinventing its network.
Much of Sainsbury’s strategy and latest omnichannel thinking is integrated within the store, providing guidance on effective brand strategies around store evolution.
Benefiting from a consolidating market
Like many other British towns, Redhill, in London’s commuter belt, has seen retail stores hit by rising costs and declining footfall. Already in 2018, several high street players have fallen by the wayside. The factors driving change and the structural shifts underway in UK retail are highlighted in PlanetRetail RNG’s UK STEIP report. Sainsbury’s, with over 600 larger-format stores, is not immune from these pressures, but the leadership team remain confident as to its strategic direction.
At the heart of this strategy is the food proposition – Sainsbury’s heritage – where it believes it can develop both an online and offline offer sufficiently differentiated from competitors. Sainsbury’s is now building to be much more than just its food heritage. It is simultaneously growing its clothing and general merchandise ranges around strategies linking physical with digital. With sectors like apparel succumbing to the forces of change, Sainsbury’s aims to win from the ensuing consolidation.
Capturing food missions through curation
Food remains a significant element of the store and over two-thirds of the 61,677 sq ft sales area is devoted to food categories. Within this space its focus is:
- Being competitive
- Delivering distinctive and exclusive products
- Serving new missions
This is illustrated through the approach to end caps, often dominated by large-scale promotions, such as 3 for 2 offers. Sainsbury’s is curating mission-focused end caps - curated solutions with themed marketing, such as Big Breakfast, Pizza Night and Roast Dinner.
Big breakfast, for example, features staples like bacon and eggs, as well as new SKUs like butternut squaffles. A balance is provided across the grouped items, with some on discounted price promotion and others at standard price. Opening up range and choice for a common shopper mission is the aim here.
Choice is a common theme as Sainsbury’s seeks distinctive and exclusive products to enhance its ambient aisles. In the confectionery aisle, for example, Sainsbury’s is seeking to ‘lift’ the category beyond its traditionally high promotional penetration levels.
A partnership with Godiva – a premium chocolate supplier – speaks to the goal of recapturing the aisle as a shopper destination. Distinctive and exclusive products, with dedicated displays and dual siting, are helping add a new dynamic to the category and encourage new shopper missions.
Capturing broader shopping missions with ‘stores within a store’
The store has been described as a microcosm of Sainsbury's strategy, bringing together food brands (e.g. Patisserie Valérie, Sushi Daily) with non-food brands (Argos, TU) and third party complementary services (Explore Learning, So Me beauty).
This looks to bring as many shopper missions in-store as possible, with one element acting as a halo for others - such as the Explore Learning facility for kids helping to drive parent visits to the Sainsbury's Café or the new pizza counter.
While Sainsbury’s owns several of its own brands (Argos, Tu), it sees a strong future for third party concessions such as Sushi Daily and Patisserie Valérie. Commercial models will vary as Sainsbury’s seeks to maximise their expertise and brand impact. There are now 700 concessions across the estate and this will mean every Sainsbury’s store having a unique footprint, with concessions introduced dependent on store size and local shopper missions.
Connecting physical with digital
The Argos brand has a significant presence across the retailer’s estate, with an Argos ‘shop within a shop’ now present in over 200 outlets.
This adds an extra footfall dynamic. While 60% of Argos orders are generated online, 80% are fulfilled in-store – another example of a halo mission that brings customers through the doors.
A small area (c.2,500 sq ft) warehouses 12,000 SKUs for immediate in-store fulfilment. Sainsbury’s supply chain infrastructure, combining national distribution centres with regional fulfilment centres and local hubs, allows Argos to support rapid fulfilment and replenishment times.
The supply chain is also being leveraged to benefit the Tu clothing own-brand. Tu items purchased online (by 2pm) are available for next-day home delivery or click-and-collect. Sainsbury’s expects this to grow the brand and push online sales towards 10% of overall clothing sales (from 4% currently).
Greater personalisation and faster fulfilment
Sainsbury’s movement towards faster fulfilment is also influencing the development of its core online grocery service. Speed coupled with reliability is the focus, as well as a stronger drive towards personalisation for shoppers.
As shoppers build an online basket, more personalisation is delivering positive results with actions such as:
- Personalised forgotten favourites
- Shopper reminders (e.g. current promotions, often seasonal, for items not top of mind)
- Helpful interventions (e.g. reminding shoppers that Sainsbury’s also sells postage stamps)
Within the physical store estate, digital integration is also developing, with Smartshop (using a handheld scanner) and scan-and-go functionality in early-stage roll-out. While these are not evident at Redhill, it was notable that 50% of transactions in this store are through the self-checkout system, suggesting high potential for the next generation of digital implementation.
Fulfilment is where PlanetRetail RNG initially expects to see a more rapid pace of change for Sainsbury’s. Its same-day ‘on demand’ grocery service is already fulfilling 5% of orders and is available in increasing numbers of stores. Similarly, the Chop Chop rapid service can be found at a smaller number of central London (zones 1 & 2) stores. This home-delivers orders within 60 minutes (or offers 30-minute click-and-collect) and This home-delivers orders within 60 minutes (or offers 30-minute click-and-collect) and provides a significant competitive advantage.
RECOMMENDATIONS FOR SUPPLIERS
|Rapid fulfilment and greater digital integration will be an important part of Sainsbury’s future as store reinvention continues. However, success for Sainsbury’s, as for many other grocery retailers, will also require a robust food and general merchandise proposition in partnership with suppliers:|
- Product curation – development of exclusive and distinct products that help to differentiate categories. In particular, suppliers must consider products that help to ‘lift’ a category beyond a high level of promotional participation.
- Create new solutions – meeting the needs of a broader range of shoppers by serving new and emerging food missions.
- Think about missions – curated food and grocery end caps provide more options for product placement beyond promotions
- Consider brand partnerships – opportunities are emerging for specialist suppliers as Sainsbury’s seek more operational expertise and brand impact for inclusion within stores.
- Engage online – brands can engage with shoppers as they build their baskets online. Suppliers should consider how to support greater levels of ‘helpful intervention’ or ‘forgotten favourites’ personalisation.
- Focus on availability – greater online volumes are being fulfilled within shorter timelines. Industry leading service levels on product availability are required.
- Recognise sustainability – Sainsbury’s is working towards broader corporate social responsibility targets. This includes an aim to reduce packaging by 50% by 2025, with 40% of plastic used from recycled sources. Suppliers should be aware of this target with regards to their longer term relationship.