Sainsbury’s CEO: Shift to online shopping will stick post-Covid-19
Covid-19 has accelerated the shift to digital in the grocery market out of necessity, but Sainsbury’s outgoing CEO believes many of these checkout-free habits will stick.
Shopping habits that have been forced as a result of the Covid-19 pandemic will stick beyond the crisis, the outgoing boss of Sainsbury’s believes.
“When people get into the habit of ordering their groceries online it’s likely to be sticky,” CEO Mike Coupe said this morning (30 April) in his final earnings call before he hangs up his hat in June.
“Almost a third of our sales are now through SmartShop and once you’ve used it once and got used to it I suspect you won’t go back to the usual checkout. Whatever was happening anyway, which was broadly a move towards digital, will probably have been accelerated as a result of the Covid situation as customers get used to a different way of shopping.”
Sainsbury’s SmartShop, which allows customers to shop using in-store handsets or their own smartphone, now accounts for up to 20% of sales in some stores.
This is according to the supermarket’s preliminary results for the 52 weeks to 7 March, which shows underlying profit before tax was down 2% to £586m, while group sales were down 0.1% to £32.4bn and supermarket sales down 0.1% as a result of weak general merchandise sales.
A new way of shopping: How habits are changing as Brits adapt to lockdown
Digital generated £6bn of sales across the business in the year to 7 March, with online groceries up 7.6% year on year and Tu clothing online up 47% compared to in-store growth of 1.2%. Argos Click & Collect grew by nearly 8% and Argos Fast Track delivery grew by nearly 5% during the period, with Black Friday breaking records at Argos with £60m in online sales on the day.
The supermarket’s Future Brands scheme for startups, meanwhile, grew sales by 77% year on year to £146m. Since launching in June 2018, Sainsbury’s has introduced over 1,700 lines across 146 Future Brand ranges.
In spite of current challenges with regard to supply and social distancing, Coupe says Sainsbury’s customer satisfaction scores are “through the roof”. Satisfaction scores are also up moderately for ‘ease of checkout’ (3%) and ‘speed of checkout’ (4%) after upgrades to over 3,600 of its self-checkouts.
Coupe believes that as a brand Sainsbury’s has a “very warm position” in customers’ hearts and that through the crisis the business has been seen to “do the right things” for customers and staff. However, he accepts that his replacement Simon Roberts and his team will be “thinking very carefully” about how the business will need to adapt post-Covid.
“Ultimately our brand stands for helping our customers live well for less, what that means as we look forward may change,” said Coupe.
“The brand has a lot of warmth at the heart of it and if anything, looking at our customer satisfaction measures – despite the fact that the challenges we’ve had around supply and social distancing – have gone through the roof. That’s a testament to how warm our customers think about us as a business.”
Post-pandemic
With regard to Covid-19, Sainsbury’s best case scenario envisages a profit impact of £500m in the current financial year from the additional costs of protecting colleagues and customers, and from reduced sales in fuel, general merchandise and clothing, to be offset by approximately £450m in business rate relief and stronger grocery sales.
It is anticipating a “return to normal grocery market conditions” by the second half of the year, which some analysts believe is on the optimistic side.
“We expect a more permanent higher demand for home delivery as worries over crowded locations persist and previously offline-only consumers adapt to the new way of shopping,” says Thomas Brereton, a retail analyst at Global Data.
“Sainsbury’s online grocery operation will certainly be coming under strain as it increases delivery slots, but Sainsbury’s must prepare for more significant, longer-term demand – especially as the likes of Ocado/M&S and Waitrose forge ahead with ambitious online growth plans.”
As the nationwide lockdown continues, rival Tesco hit 1 million online delivery slots a week for the first time and its CEO Dave Lewis this week described the shift to online shopping as the “single biggest” change to come from the Covid-19 pandemic.
Whereas prior to the crisis 7% of all its groceries were bought online, Tesco has achieved an increase in online capacity of 103% in the space of a few weeks and expects to add a further 200,000 delivery slots over the next 10 days.
Elsewhere, Aldi has begun to roll out UK online grocery sales, opting to sell a bundle of 22 essential products for £24.99 (including delivery), with customers limited to one package each.
The latest statistics from Kantar support this wider switch to digital. Online grocery spend among over-65s has increased by 94% year on year during the coronavirus crisis, while online sales now account for 10.2% of the grocery market versus 7.4% last month.
