Sainsbury's / Argos / Habitat - New location...

27 December 2016

Firstly, Merry Christmas!

The emails didn't quite make it out pre Christmas for the various retailer reviews; however these will come out over the next couple of days to review how things went in the market.

A mere 2,200 images were taken from 17-23 December which allows plenty of analysis from Christmas and in to the new year too...

All eyes on 2017 for Sainsbury's and their larger group with the Argos / Habitat businesses having joined the family and will have to earn their keep, justifying the purchase price....

It remains an interesting piece of work, and the Habitat business (despite seemingly not being part of anything, until it emerged Sainsbury's were keeping it) looks smart. It aligns with the core JS customer well and the non food offer in JS itself has come a hell of a long way in the c.10/12 years since they relaunched it.

You always have to wonder with Argos, who is their core customer? It's entirely unclear who shops there as a classic customer, but plenty do.

Arguably the major mistake Argos made was moving into larger units that were great for footfall but did little for the offer. People are in Argos on a mission, quite literally. With reservation number in hand, they want to be in and then out again.

No one really dwells and the lines that Argos feature in the larger stores are bizarre in many respects. It just shows what can be done when the Sainsbury's implant pops up in a tiny space.

The logistics operation is strong at Argos though, it always has been. A real pioneer of click / collect before the internet in reality and they do have a relatively loyal band of customers, growing their scale with Sainsbury's whilst pulling out of the larger, expensive locations would make sense...

Another opportunity is their fast track service, which often results in the white van speeding around (seen today, Boxing Day) with deliveries promised within a 3 hour time slot. Ordering before 6pm means you can have the item on the same day by 10pm. The fast track service in store should be discontinued though, every store I've either used or visited often has longer queues at fast track than the normal checkout operation......

Not all items are included in Fast track, but it's a great same day service and offers a push back on Amazon who are rolling their Prime now service. The one in this area (Yorkshire) appears to utilise a local taxi firm to make the deliveries, however the service does feature some food lines (ambient in the main)....

As we know, Argos are a non food merchant but the logistical operation could well be utilised by Sainsbury's to offer an element of a same day food delivery service.

If marketed as one for essentials, alongside one that would help party hosts out, then it would be effective. Particularly if there's a nod towards the 'functional' shop. IE we'll do the boring bits - Grocery is a difficult sell for customers, it's functional and retailers struggle to make it attractive vs. Fresh - which is far easier to make look interesting.

Ambient is also easier to shift in quantities and also doesn't have the short dates that Fresh Foods have. A soft launch into groceries in selected shops would be a logical next step to make the operation work.

Ideal for those shops that have an Argos attached, the Sainsbury's systems are relatively dynamic with up to date stock positions - which could link up to online to give visibility of a store stock position.

Stock records are never 100% accurate though, but the JS model is well tuned now and with lower volatility, particularly with the multi buy promotions having disappeared, this should smooth the forecasted demand given that multibuys are notoriously difficult to forecast.

There is the opportunity to potentially roll out the same day service to the non Sainsbury's Argos units that are left over, perhaps via click / collect as it would greatly enhance the coverage Sainsbury's has across the UK.

The food deliveries for click / collect could be added to the online drivers route - rather like a normal customer. The stores in retail parks can have a 'drive thru' collect option added where appropriate, Asda do very well with their solution here.

There looks to be a number of opportunities for the enlarged chain, that's without considering the greater depth of range that the Argos catalogue the business brings.

Habitat too can bring in a degree of affluence given the heritage the chain has within non food, nicely backed up within the Sainsbury's GM offer which is very sharp indeed.

All of which will drive footfall into the core Sainsbury's stores, with a footnote at the last set of results noting that there was a halo effect in Sainsbury's stores that have an Argos within the offer.

Speaking of footfall driving, post the Netto joint venture that sadly ended earlier in 2016 without progression, Sainsbury's / Argos / Habitat are set to take this site for their new offer, which will likely boost footfall very nicely to the Moortown store in Leeds.

One of the better performing stores in Yorkshire, the store is set to get a refit as part of the work which should enhance the offer even further.

Intriguingly, Moortown have the click / collect grocery offer which is relatively embryonic but has rolled out. However the model selected is a little prehistoric, with a delivery van sat at the collection point waiting for customers to come and collect their shopping.

That surely adds cost when the purpose of click / collect is to reduce cost by eliminating the delivery leg of the journey? Offering customers a discount for getting to the order point as close to their intended time as possible could be a way to reduce wait time for the drivers.......

The fact that Sainsbury's are looking to roll out their Argos / Habitat joint offer to new stores shows signs of their ambition to roll out the cojoined offer into units near a larger Sainsbury's.

Whilst an entirely new store, it will mean that the Argos currently inside the Homebase (adjacent to Sainsbury's) will close and re-locate onto the other part of the site.

A Homebase renaissance from the ownership of Bunnings could also benefit Sainsbury's, given a great number of Homebase stores share a site (and building in some cases) with a JS store given their former ownership of the business.

Convenience is all about just that - being convenient but it isn't just in the mass market with convenience stores like Tesco Express.

Whilst these units are vital and do a great job within the sector; convenience is about minimising hassle for the customer. So siting Argos within Sainsbury's means you can get Bread / Milk alongside your collection, then it works.

Similarly offering click / collect food/booze (potentially) from Argos sites / within the Argos fast track service also is regarded as convenient for a shopper.

Whilst Sainsbury's may not be as cheap as others in the sector, a customer may trade that off alongside the need to have a food delivery within 3 hours or even click / collect at the local retail park Argos site.

It's just whether the numbers stack up, moving quickly on these strategic points would give the City a bit of hope that things are progressing beyond putting implants within the Sainsbury's stores.

A high price was paid for Argos, but as a strategical opportunity - it proved too big to miss for Mike Coupe and co. With Amazon looming large in the capital with their Fresh offering, it does makes sense.

Their move certainly spooked Tesco who spent their entire non food Christmas comparing and beating Argos prices across the board.

But with the weakening sterling hitting import costs in 2017, it will put the pressure on a predominantly non-food based business and the margins, particularly with competitive pressure in the market already starting up....

Whilst any Homebase renaissance could bring customers to any joint Sainsbury's / Homebase site, it's also another competitor with Argos doing a decent enough trade in gardening power tools and other relevant lines.

All eyes on 2017 for Sainsbury's; bringing Habitat into the wider world, alongside Argos is a notable move indeed......

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From the Grocery Insight newsletter archive, first sent to subscribers on 27 December 2016. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.