The proposed mega merger between Asda and Sainsbury begs five very important questions for the boss of Sainsbury’s.
They are CEO’s Mike Coupe’s to answer because Asda has been doing poorly and its owner Walmart will be glad to be shot of it.
Sainsbury’s owners will be much more sceptical.
The biggest questions arise around the stated intent to run both brands side by side with few if any store closures.
Sainsbury’s is due to make an announcement to the stock market on Monday, shedding more light on the deal.
1. How much will customers pay?
Both say this is going to be good for customers. Does that mean Sainsbury’s customers (who currently pay a little bit more for their groceries) will pay the same prices as Asda customers? One of the big “synergies” will be combined and greater buying power. Will they buy at one price for both stores and sell according to different price lists? When you have stores side by side won’t Sainsbury’s shoppers feel ripped off if they are paying more for going through a different door?
2. Will there be store closures?
Are they really guaranteeing no store closures? If they have two large stores in the same town do they really need the combined square footage when the likes of Tesco and others are trying to reduce the amount of retail space?
3. How many jobs will go?
Even if we take them at face value and no stores close – another big cost saving is presumably the logistics and depots they use to stock their stores and fulfil online orders. It strains credulity to imagine this is an area where consolidation and cuts will not occur. Presumably there will be no need for two head office operations.
4. Will Argos work in both stores?
Although Sainsbury’s seems to have integrated the Argos brand pretty well, that was a lot easier as Argos is a different category – non-food. Can you run two fascias side by side without blurring the brand identity of both – thereby confusing and potentially losing customers?
5. Will shareholders back the deal?
Even if the competition authorities allow it to go ahead – what about the shareholders? Most of the ones I’ve spoken to have pretty big reservations. As one said to me – there isn’t one positive message about this deal in my inbox.
Source: BBC News