SWOT Analysis of Sainsbury’s
July 6, 2017
Started over a decade ago in 1869 as a small dairy shop in a rented property on London’s Drury Lane by a young couple, Sainsbury’s has come a long way to becoming a nation- wide retailer with more than 1200 stores in the UK. With such a large number of stores Sainsbury’s has become the 2nd largest chain of supermarkets in the country with 16.5% supermarket share. This has been a great strength of the organisation especially in the late 80s and early 90s. This is because it indicates the effectiveness of the business strategies of the company that contributed significantly in expanding its domestic market presence within a limited time span. Starting as only a dairy shop, Sainsbury’s eventually introduced departments like farm, bacon and ham, poultry, cooked meats, fresh meats and later groceries in 1903. This enabled the company to provide a wide range of products to its customers and expand their business. The company has achieved growth in general merchandise and non-food product business also, like garment, kitchen ware and home ware. Expansion of product lines would enable the organisation to fulfil varied demands of the customers. It is intending to spend half the shop space to sell non- food product items to fight back for its falling grocery sales. Diversified investments are enabling the company to continue to keep its strong foot hold in the ever growing UK retail market.
The company recognises the importance of reaching out a larger number of people through internet, which is evident in its strong online presence. Through the online selling of product the sale of the company has increased by around 20% in weekly orders in 2010-11 thereby acquiring more customers. This would further help in attracting more customers, considering the non-existence of transportation costs involved in online shopping.
Its ability in food retailing is proved by the fact that it has won more Quality Food Awards than any other retail organisation in 2010. This would help in gaining more customers’ attention. The organisation has excellent brand image in the UK that would help in obtaining the required governmental support. At the same time, it would enable the company to attract potential investors.
This organisation is limited only in the UK. Its limited presence in the global market limits its scope for business growth. This means that if the organisation faces any problem in retailing sector in its domestic country then it won’t be able to compensate its loss. It is also proving a limitation for acquiring a wide range of customers. Not entering in the global market restricts potential investors to invest in the organization.
Technical problems are also hindering the business of the company. In 2008 there was a technical fault which suspended Sainsbury’s official website for 2 days which had affected 10,000 online shoppers. This has hindered organisation’s business and the opportunity of making profit as well as its goodwill to an extent. At the same time, it would have a negative impact on the reliability of the online products offered by the organisation. This in turn, would restrict the potential online customers from making a buying decision.
The organization is one of the four leading supermarket chains in the UK with a legacy of over a decade. Still it has recently closed 16 stores and there has been a fall in its sales. The reason could be attributed to the lack of advertising. This would restrict the organisation from strengthening its financial position. Sainsbury’s media spend is down around -4%. Sainsbury’ has limited compelling campaign to beat the competition against the newly introduced discounters. Installation of self checkout tills has been a great failure of Sainsbury’s that might pose a question mark on the effectiveness of its customer service strategies and ability to identify the demands and preferences of the customers. This in turn, would have a negative impact on the level of customer satisfaction and the capability of the organisation to boost and develop brand loyalty.
There are many opportunities for Sainsbury’s in terms of expanding their presence globally especially in emerging economies like China, India, Brazil etc which has a large working population and provide a wide market. Countries with fast growing economy would provide plenty of labour at a low cost. This will reduce the cost of production of the company which will lead to the selling of the finished products at a relatively low price and thereby, attracting more customers. Minimising the overall expenditure would enable Sainsbury’s to invest more in opening of more outlets. This would help in attracting more potential customers on a global level. This in turn, would enable the organisation to gain competitive advantage in terms of higher market share.
Emerging markets have potential customers with rising disposable income that boosts their affordability. Establishing a retail store in such markets would increase the demand of such products among the population thus, adding in the profit of the organisation. Also, existence of limited or no competitors would help in establishing a strong foothold.
Another opportunity for Sainsbury’s is in the field of digital marketing. With an increase in the online shopping facility in the UK, Sainsbury’s online shops can enable its customers to shop at the convenience of their own place. Further it would offer great flexibility to customers who have mobility issues. People can reach out for the products online whose physical availability is very limited. For instance, ‘Tu’- a Sainsbury’s brand- is available in few selected Sainsbury’s outlet across the UK. However, the same brand can be purchased online from their website.
Sainsbury’s face the same threat like any other supermarket chains in a retail sector i.e., competition. Especially with the introduction of discounters like Aldi and Lidl which are providing competitive quality of products but at a discounted rate. Also, the rising cost of living in the UK may force people to reduce their spending. In such a scenario people will be attracted towards discounters to get quality products but a reduced price. Also, if customers are not happy with Sainsbury’s for any reason they would have an opportunity to move to other stores like Aldi and Lidl.
Global increase in food price has also impacted Sainsbury’s price of food product which is compelling it to sell its products at a higher price. In a competitive market it is becoming a threat for Sainsbury’s to maintain the quality of the product and without compromising the price or vice versa. To deal with the situation the company either has to reduce the price or the quantity of the product or introduce new low cost products to replace the earlier ones.