Weekly Retail & Leisure News - 04 April, 2016
Sainsbury's has announced that the board of Home Retail Group, which owns Argos, agreed to its £1.4bn takeover offer on Friday. The UK's second biggest supermarket was left a clear run to buy Argos when rival suitor South Africa's Steinhoff International withdrew last month. The supermarket stated that the deal would create a "multi-product, multi-channel" retailer. Tim Vallance, head of JLL UK Retail commented "Sainsbury's has recognised that now is not the time to stand still and that innovation in channels of sale for their goods is essential to keep up to date with consumer behaviour."
The Sainsbury's deal is also a reflection of the growing pressure on grocery retailers' margins. This is partly due to food price deflation - data released this week by mySupermarket.co.uk shows that the price of groceries has dropped for the fourth month in a row and is now at the lowest recorded level since December 2014 – and also due to growing costs, such as the new National Living Wage. As Tim Vallance continued, "Sainsbury's sees the value in having a variety of locations and channels of selling their food, clothing and homeware ranges and they understand that price cutting alone isn't the way to attract consumers or cultivate loyalty: convenience and varied offering is also very important."
This news follows the recent Amazon and Morrisons fulfilment deal, and as yet unsubstantiated reports from Germany that Amazon are planning to open a store on Berlin's most prime high street. These moves highlight how retailers are vying to provide customers with seamless distribution via true, omni-channel platforms. As James Brown, head of European Retail Research, comments in his latest blog: "we are starting to see that the right combination of product, customer service and seamless distribution really does work in driving incremental sales, even against a muted economic backdrop."
Read James Brown's blog on how Christmas 2015 gave us a glimpse into the future of retail.
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Director, Head of Retail Research (UK & EMEA)
+44 (0)20 3147 1155
Director, Head of UK Retail & Leisure
+44 (0)20 7318 7838
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