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February 18, 2005

City rumours

From today's Scotsman:

RUMOURS of a takeover of Sainsbury swept through London dealing rooms again yesterday, helping to prop up the wider market. The supermarket’s shares rose 2.7 per cent to 302p as traders considered the possibility of a management-led buyout at 325p-350p per share. Trading was heavy with 27.7 million shares changing hands, more than double the 12.6 million average daily volumes this year.

It must be hard running a company that's out of favour with the market. There you are trying to figure out what's wrong - which is probably not amenable to a simple solution. And you likely constantly distracted by the stock market, which seems to thrive on rumour and the lust for a quick fix.

Posted by Johnnie Moore on February 18, 2005 at 09:32 AM in Financial | Permalink | Comments (0) | TrackBack

February 14, 2005

Labour problems

"Sainsbury is in a dispute with its depot workers over plans to make staff work more weekends and proposals to change severance contracts."  Link

"SAINSBURY'S faces losing £1million a day in sales if staff strike to support two colleagues sacked over stolen chewing gum." Link

On a brighter labour relations note, "Retail union Usdaw has launched an in-store learning partnership with supermarket chain Sainsbury's, offering training in areas such as IT, literacy and numeracy." Link

Posted by Johnnie Moore on February 14, 2005 at 03:34 PM in News | Permalink | Comments (0) | TrackBack

February 11, 2005

Sainsbury's Problems: All About Leadership?

Why do some supermarkets do consistently well while others do consistently badly? For example, Asda generally moves from strength to strength while Marks and Spencer consistently disappoints; Tesco tends to shine while Sainsbury struggles.

Some might argue that one of Tesco's critical success factors is their consistent customer service and product quality. For Asda, it might be their low cost distribution system. A key problem for Marks and Spencer's could be its inability to meet the needs of (m)any of its market segments, and for Sainsbury's, a key issue might be its logistics and supply chain.

My hypothesis is that any ongoing problems in an organisation with strong financial resources (like Sainsbury's) are a function of weak leadership. Although this may seem like a truism, I would like to suggest that it goes deeper.

My reasoning is that business schools and top consultancies have and are continually shifting management practice from art to science. This means that for many classes of business problems - including cultural, strategic, operatational, logistical, financial, etc. - there exist well-established, evidence-based, best practice interventions. Therefore, fewer business problems require creativity on the part of modern senior leaders; instead, they simply need to be open to seeking an appropriate solution.

Specifically, in the face of trouble, leaders should be open to:

1. Seeking sound advice

2. Judging whether the advice is good or bad

3. Implementing the advice and

4. Facing the fear associated with change

Unfortunately, however, human nature is such that when faced with bad news, it tends to do the opposite of the above; instead of opening up to new solutions, leaders at poorly performing companies like Sainsbury's adopt a "bunker" mentality and shut down. They become averse to listening, judging, implementing, and changing just when these competencies are most required.

Can these insights be learned? Psychological theory suggests that they can. But one seldom sees this. More commonly – leaders listen only when change is forced upon them and their company's very existence threatened. Then, and only then, does the board appoint a new - hopefully more open CEO - or the company is acquired and the whole board replaced.

Is there a way around this? If you have any suggestions, feel free to post them here.

Posted by Max Blumberg on February 11, 2005 at 08:40 PM in People | Permalink | Comments (1) | TrackBack

Employees first?

I thought this comment by "Kundalini" to an earlier post deserved more prominence:

My understanding is that Sainsbury have effectively lost their staff.

Recent staff surveys suggest that morale has collapsed, at least in part due to the mismanagement of recent years.

Huge wage packets for board members including those who have clearly underperformed, fancy adverts with Jamie Oliver, combined with uncompetitive salaries and incentives for employees, is a losing combination if ever I saw one.

The service profit chain theory suggests that Sainsbury are in deep trouble.

Tesco, in comparison, have done a great deal of work in the area of employee insight, creating an employee value proposition that is flexible enough to appeal to the different segments of their workforce.

Something that Sainsbury might like to investigate.

Get your employees to believe first, then you may get the opportunity to implement the changes required to improve the stores, which should in time lead to a better atmosphere and increased sales.

Any attempts to make changes while the staff detest the leadership are unlikely to be a success as anyone accustomed to the world of change management would know.

I'm afraid the advertising side of things probably needs to wait until the basics have been sorted out.

If staff turnover is high relative to competitors Sainsbury will simply not be able to put in place the sort of changes in the timescale demanded.

It would be interesting to hear of other people's experiences.  I know that I believe it's vital to give priority to staff.  Look after the staff and the staff will look after the customers.  My own sense visiting my local Sainsbury's is that many of the workers are a bit demoralised.  And I agree with Kundalini, advertising should be a lower priority.

Posted by Johnnie Moore on February 11, 2005 at 05:38 PM in People | Permalink | Comments (0) | TrackBack

February 07, 2005

What if?

As Freddie noted, Sainsbury's are putting their advertising account up for review.  Fair enough, it's a standard way to get some new ideas out of agencies.  But maybe they should also consider this as a thought experiment: what if they stopped advertising altogether?  What could they do with the money to create greater customer engagement?

Maybe their marketing department needs to spend more time at the chalk face meeting staff and customers, and less time talking to admen... 

What if they stopped broadcasting to customers and instead said, hey, come and tell us how we could do better? 

So many companies in difficulties put on a brave face and try to distract us with a new advertising gimmick.  Wouldn't it be interesting to say, hey, we are in trouble but we want to turn things around.  We've tried hard, but some of what we're doing clearly hasn't worked for you our customers.  So we're going to stop advertising for a while and instead spend more time talking to you - finding out how you want us to do better, so that we can do a better job for all of us.

Of course, the City boys might freak out.  They seem impatient for miracle answers and don't seem to like vulnerability or uncertainty.  It's a shame; I can't help thinking the City is a big part of the problem here.

Posted by Johnnie Moore on February 7, 2005 at 10:45 AM in Marketing | Permalink | Comments (2) | TrackBack

February 06, 2005

Retail Week Annual Conference

I just spotted that the Retail Week Annual Conference is taking place on March 16-17 at the London Hilton Metropole.

Do we know anyone who is going? Does a reader want to be our eyes and ears at the conference. It would be great to hear any insights with respect to the Supermarket sector. If you are interested leave us a note in the comments.

Posted by Fred on February 6, 2005 at 08:20 PM | Permalink | Comments (0) | TrackBack

Do Sainsbury give UK customers what they want?

I'd like to pick up on Freddie's post about what Sainsbury's stands for.

McKinsey conducted a study of 1500 consumers in the UK, France and Germany. Although the study was conducted in 2001, many of the findings are still relevant today to large supermarket chains.

Three primary drivers for selecting a particular supermarket emerged: price, affinity (with a particular store brand), and quality.

The study showed - unsurprisingly - that UK shoppers are driven primarily by Affinity to the the supermarket brand.

Affinity is driven by clear marketing messages communicating convenience, trust and service. Instore experience needs to match the messages received.

Therefore, Sainsbury needs to address its logistical and operational issues so that the stores become more convenient for shoppers, engender greater trust, and improve customer service.

These in turn will provide Sainsbury with the affinity required to retain UK shoppers.

Posted by Max Blumberg on February 6, 2005 at 06:06 PM in Marketing | Permalink | Comments (4) | TrackBack

February 05, 2005

Funny little Sainsbury's story

Just flicking through the Jan 28th Retail Week. Came across an article discussing how Sainsbury's clothing line has really taken off since they axed the Jeff Bank's range of clothes and brought in the Tu line of clothing. The change has lead to same store sales growth of 28% in clothing year on year.

However this really caught my eye and made me laugh:

Sainsbury's sensationally sacked Banks in November 2003, but continued to stock Jeff & Co until August of last year. Sainsbury's was forced to pay Banks £1m for terminating his contract, and bowed to his demand that a box of £2.99 Taste The Difference Belgian truffles be delivered to him every week.

What a great story that is! I would love to hear any similar JS stories like this from you guys. Please leave them in the comments.

Posted by Fred on February 5, 2005 at 05:13 PM in Stories | Permalink | Comments (1) | TrackBack

Shooting the messenger?

I saw that Sainsbury's is putting it's advertising account with BBH AMV up for review. This relationship has lasted over 20 years and was instrumental in the relationships with Jamie Oliver.

You never now the details of these things. Justin King is obviously keen to make his mark and this is a decisive move. However it does not hide the fact that Sainsbury's lacks a strong differentiation. This is a management problem, not an agency one.

Bringing in new ideas and a new agency can sometimes be a great way to freshen up the image. However, it is the substance that matters. Image is quick fix, substance takes a lot longer.

I hope Sainsbury's are addressing these longer term issues too.

PS. The speculation suggests that Jamie's relationship with JS is up for review in May and that it is unlikely to be carried on. I am sure that his wife Jools will be glad of that - she can now happily shop at her preferred Waitrose!

Posted by Fred on February 5, 2005 at 04:54 PM in Marketing | Permalink | Comments (1) | TrackBack

What does Sainsbury's stand for?

I spent this morning wandering the aisles at my local Waitrose and fell to thinking 'why I didn't go to the local Sainsburys?'

Two reasons have occurred to me.

As Johnny suggests, retail is detail. So the fact that I have to queue to get into the Islington car park almost at any time of the weekend is a huge disincentive. I drive past the car park frequently and would rather drive the extra 10-15 mins to Waitrose than simply sit there queuing. My local JS loses me at least 6 times a year as a customer for this reason alone. That is probably around £750 of lost sales.

However, whilst this is an issue, there is a far bigger problem. If I am convinced that what I am about to experience is worth it, I'll queue all day. But with Sainsbury's I am not convinced.

If I want cheap groceries, I'll go to Tesco's, Asda or Morrisons. If I want quality I go to Waitrose. Why should I go to Sainsbury's?

I wrote here about how a company needs to be great at one thing, even if this means that other factors are less of a focus. Being charitable, Sainsburys fails to communicate what its one things is. What does it bring to my party?

However, being less charitable, I'm not sure that Sainsbury's actually knows. Recent ads promoting Sainsbury's as a price leader are totally at odds with those used over the past couple of years featuring The Naked Chef, Jamie Oliver, and promoting quality.

As I said in the same article, there are 3 ways to create competitive advantage - costs, differentiation or focus. The biggest danger is that you fall between these three stools. This is exactly where Sainsbury's sit in my mind. Not the cheapest, no definable differentiation, and too big to be the focused niche player.

As I concluded, companies that get 'stuck in the middle' are typically at the mercy of their more focused competitors.

Sainsbury's need to think much harder about what it is they stand for.

I will return to this topic many times.

Posted by Fred on February 5, 2005 at 04:13 PM in Marketing | Permalink | Comments (1) | TrackBack