Sainsbury’s mobile offering poses risks and rewards

Sainsbury’s tie-up with Vodafone offers the retailer the opportunity to shore-up its mobile offering and keep abreast with rivals Asda and Tesco. Although analysts warn that its comparatively late entry into the market could prove a severe handicap.  

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The pair announced their 50/50 joint venture Mobile by Sainsbury’s, which is scheduled to launch this summer, earlier this week (1 July) making the retailer the latest entrant into the UK’s crowded virtual mobile network (MVNO) market.  

Mobile by Sainsbury’s is poised to offer a low-cost, no frills, mobile phone services –  similar to rivals Tesco and Asda Mobile –  and has pledged to focus on “simplicity” and reducing the “stressful experience” of deciding which tariff and devices to opt for. 

Full details of the offering and leadership team have yet to be confirmed but retail and telecoms experts approached by Marketing Week anticipate an extensive roll out of Mobile By Sainsbury’s outlets across the retailer’s footprint. 

This will be key to Mobile by Sainsbury’s emulating the success of Tesco Mobile,  a similar joint venture MVNO from rivals O2 and Tesco, according to Emeka Obiodu, principal analyst at telecoms analyst firm Ovum. 

“I don’t see much way for [Mobile by] Sainsbury’s to differentiate itself, I see this as a ‘not being left behind’ move plus it’s a way of it getting its brand into mobile without the heavy burden of being a [standalone] MVNO,” he says. 

Similarly, Dr Clive Black, head of research at Shore Capital, sees the move into the telecoms sector as a ‘hygiene factor’ from the retailer. 

“We see this move as credible but it must be placed in the right context, this is a modest incremental step and not a game changer for either Vodafone or Sainsbury’s,” he says. 

“Sainsbury’s customers will have a little more choice and no doubt Nectar will be incorporated into the proposition. Over time if the venture gains traction it is possible that it could make a helpful incremental contribution to the Sainsbury’s bottom line.

For Vodafone, the benefit of launching a fully-fledged joint venture with Sainsbury’s will be both the revenues from selling wholesale airtime, plus the share in any profits generated by Mobile by Sainsbury’s, according to Obiodu. 

“It won’t be easy to break into to the MVNO market but what will help is [Sainsbury’s] having a substantial retail footprint,” he adds.  

Meanwhile, Neil Saunders, managing director at retail analyst firm Conlumino, says: “There are also some strategic opportunities in terms of promoting Sainsbury’s offers via mobile services. This will also allow it to potentially gather more data on customers which can then be used alongside other data sources, including Nectar.”

Developing new business is a core part of Sainsbury’s business strategy with the retailer launching an eBooks, MP3 download service and video-on-demand service within the last 12 months.

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