A renewed focus on value from competitors is forcing Sainsbury’s into substantial price cuts

Following the news that Sainsbury’s have reduced prices on over 1,000 own-brand prices since February, Thomas Brereton, Retail Analyst for GlobalData, a leading data and analytics company, offers his view:

“Following the collapse of its proposed merger with ASDA – which included the promise of staggered price investment to reduce everyday prices by 10% – ongoing pressure from the discounters and new price-focused initiatives at Tesco, such as the launch of the ‘Fresh 5’ offer on fruit and vegetables, have forced Sainsbury’s hand into price cuts anyhow.

“From a customer viewpoint, these price cuts are undoubtedly impressive, saving its customers a valuable 18% on an average basket spend. However, the trouble for Sainsbury’s lies in conveying this value-driven message clearly to both current and potential customers, and it must do more in this regard if it wants shoppers to associate Sainsbury’s in a similar ‘value’ league to the likes of Tesco and Morrisons. This has been a clear problem for Sainsbury’s over the past year, as the percentage of shoppers who selected Sainsbury’s as their primary supermarket has fallen from 13.8% to 12.8%, according to GlobalData.

“Given its recent poor performance in the grocery market, Sainsbury’s is now walking a difficult tightrope between recovering customers and avoiding financial distress. Although these price cuts are imperative to stemming the number of customers switching away from Sainsbury’s in favour of more value-centric supermarkets, Sainsbury’s must ensure that it can successfully offset the loss of revenue with customer acquisition. If not this strategy could lead to unsettling figures in its next set of results, with a 2019 grocery market built on very challenging comparatives and the impressive performances at its closest rivals.”

More Media