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Asda and Sainsbury’s set to merge

When it was announced that two UK supermarket giants, Asda and Sainsbury’s, were set to merge in a shock £10bn deal, it was said that the possible reason for the union was a direct response to Tesco’s recently completed merger with wholesaler Booker. A culmination of factors is likely to be more accurate.

The merger is designed to position the supermarket chains as a more powerful rival to long-time market leader Tesco.

We’ve spoken before about the changing face of supermarkets, and how retailers are taking action to stay competitive in a very tough market with increasing pressure from rivals.

There has been a definite rise in the creation of the concession store (store-within-a-store), to make shopping a much more convenient endeavour for the customer; giving them more than one reason to get out of the house and go shopping.

Sainsbury’s has previously already formed a partnership with Argos, implementing around 250 Argos concessions in its stores across the UK to cater to the convenience market.

However, Asda has little presence in the convenience market and has struggled to compete against the likes of discounters Aldi and Lidl when it comes to price.

Retail analyst Natalie Berg, told Sky News that there has been “unprecedented levels of change” in the sector because of the “onslaught of the discounters.”

Similarly, retailers other than supermarkets have also had to adapt to the changing nature of shoppers’ spending habits; evolving their stores into more, immersive, lifestyle experiences rather than just offering products for sale.

It will be interesting to see if stores retain their single brand or merge brands. Both brands have very different target markets with Sainsburys offering customers a slightly more upmarket experience, putting more emphasis on quality. But together at board level they can capitalise on the buying power. Sainsburys currently can’t compete with major supermarket prices alone, but backed by Asda, they should be able to ensure quality at better prices.

So it remains unclear at this stage whether major in-store refurbishments in both Asda and Sainsbury’s locations will take place as specific details about the merger have yet to be released.

Hoardfast
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