‘The discounters won’t be able to keep their prices low for long’ claims Sainsbury’s Mike Coupe

Sainsbury’s chief executive Mike Coupe has expressed doubts to whether Aldi and Lidl can maintain their marketing leading edge on low prices.

Speaking at yesterday’s (15 March) Mumstock event by Mumsnet, the Sainsbury’s boss said that as the discounters continue to become “more mainstream” supermarkets, they would “struggle” to maintain their low prices.

He told delegates: “As Aldi and Lidl grow they are starting to look more and more like mainstream supermarkets. There is a limit to how many categories they can expand into until they start to become more and more like a big four supermarket.

“Expanding their fresh food offer or going online, it will mean they won’t be able to maintain their prices. Their prices will be hit eventually.”

He admitted that the rapidly expanding German discounters had “done a really great job in their advertising” through a focus on quality and securing middle class shoppers. Ultimately, however, he believes shoppers will tire of the limited ranges they offer.

“At Sainsbury’s we have 25,000 SKUs, while Aldi has 2,500 products on sale,” Coupe added. “The price barrier is the biggest issue but we are becoming more competitive on price and you just hope people will tire of wasting time at multiple shops and return to doing one big shop.”

Home Retail bid

Coupe was speaking after steering Sainsbury’s into its first sales growth in two years as its like-for-like sales for the nine weeks to 12 March edged up 0.1%.

Sainsbury’s is currently considering whether to make an improved offer for Argos owner Home Retail, after its previous bid of £1.3bn was bettered by South African retailer Steinhoff by around £100m.

Coupe said if it were to fail in its next bid, Sainsbury’s would “find a way of doing it ourselves” in reference to the click and collect expertise Argos would offer.

Predicting people’s groceries

With the rise of the likes of Amazon Pantry, which allows customers to replenish every day items at the touch of a button, there has been a lot of talk of British grocers looking into similar technology.

And Coupe said that Sainsbury’s is aiming for a future where it knows every single customer on an intimate basis.

Referencing his two daughters, he explained: “When they would come home from university they would eat us out of house and home. We’re aiming for a future where Sainsbury’s can predict when you’ll need more groceries than usual. Where you’ll get your weekly shop delivered without even having to do anything. A few years ago Uber couldn’t have existed so anything is possible.”

But in its quest to embrace new forms of digital marketing and personalisation technology, Coupe insisted Sainsbury’s wouldn’t lose focus towards its older customers.

He concluded: “Soon 20% of the UK population will be over 60, so it’s all well talking about new technology but you can’t place all your bets on it. Your attitude to technology has to be different from customer to customer.”

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Comments
  • fried_egg 17 Mar 2016 at 9:09 am

    Having a “toe in the direct data water” with the new Netto in the UK he has a better idea of how a discounter works than the average “premium seller” trying to see how the other side works. It is also very likely that as the discounters mature they will be tempted to move up along the margin curve, via a brand expand… and at that point he is right, they will ultimately become what they were not… a bloated full service offering. People get bored with “low cost” and investors like “fat margins” – the pressure on the discounters to chase or adjust will always be there, which is why only privately held ones tend to resist the greed to “take a little more” via expansion out of their niche

  • Brian George 17 Mar 2016 at 9:15 am

    I think Mike makes a very valid point; sure the discounters have been active/on-trend, but after a while customers will get fed-up with the very limited choice and tertiary brands and then they’ll be in a similar position to that of Waitrose a few years ago (but for different reasons), in that aside from hard-core ‘cheap shoppers’ consumers will start to use them as a basic shop area only.
    The next stage will be, as Mike says, that they’ll have to significantly widen their range and services, with a resultant hike in prices and loss of discounter status.
    Shopping will then turn full circle with a resurgence of, in an increasingly time-poor society, the large-format stores – that is if you really believe that the large-format stores were failing anyway.
    Or as Tesco seems to be showing they are actually becoming the engine of growth again!

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