Market analysis and business overview of Sainsburys
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Sainsbury's is one of biggest food retailers and currently third largest supermarket chain in the United Kingdom. The company established in 1869, with a small store and expanded quickly to 537 supermarkets and 276 convenient stores excluding Sainsbury's bank and insurance all over the Britain. It has more than 150, 000 employees and serve above 11million customer every week and sells over 30,000 products in retail chain business. Moreover Sainsbury's annual turnover is around £17.4 billion with profit of £289 million (Data Monitor 2010). The company sells varieties of essential products "such as grocery, fresh food and drink, fresh vegetable, bakery, toys and games, kitchen appliances, technology, sport and leisure etc" to their consumers in the competitive price including complementary non-food products services. Sainsbury's brand is 'value for money' by giving finest food for best health, in addition to this sales and excellent customer services helps to enhance company profitability (Sainsbury's 2010). The company runs their retail chain operations in three different styles such as Main Plus, which is also known as hypermarket, Mixed Mission and Main Mission all over the UK.
Corporation tax: Reduction in corporation tax from 28% to 24% will have great impact on big companies like Sainsbury's for future expansions.
VAT: Increasing in VAT will have great effects on food and drink industry, especially supermarket. Sainsbury's most of the products are VAT related, which will impact on the margin of organization. On the other hand rising fuel cost will affects the supply chain of the industry.
Disposable income: From the articles (Earnest & Young) the level of household income has gone down by 15% in 2008-2009 in comparison to 2003-2004. So the level of family gross income is decreasing by 20% during 2008-2009 compared to 2003-2004. It has been noticed that the significant reduction in the income level of family during the period was 8% (Key Note)
Unemployment rate: Due to global recession the unemployment rate has gone up from 4.8 % to 8.6%. This will create stress on the industry economy.
Healthy food: Increasing obesity in the younger group and adult children is a major concern in the UK. Government takes initiative by creating awareness regarding healthy and organic food. This had major impact on the retail industry, especially Sainsbury's to grab the market faster (Euro Monitor 2010).
Globalization: Many organizations are trying to cut down the recycle-item. UK government also stress on green environment and eating healthy organic food due to this may company takes initiative of planting more trees in future. Sainsbury's also commence 200 million plantations of trees in next five years which will help to protect the environment and trees in future.
Online Shopping: It has been predicted that by 2011 online shopping will increase within western countries. Customer will buy more online to save time and money.
Self check out: Computerized Self Till system enhances the consumer shopping faster. It helps to reduce the queue at the time of check out, moreover consumer also enjoy shopping and feel secured in making payments (Mintel 2010)
Porter's 5 Forces analysis:
Price war in supermarket is very competitive due to huge competition, may companies like Tesco, ASDA and Sainsbury's has moved to non-food sectors (Rigby and Killgren 2008)
Currently Sainsbury occupy 16.01% market share in the UK retail chain by March 2010 and it keep on increasing steadily. The company is trying to expand in African trade by £250 million (J-Sainsbury's 2010).
UK retail industry are occupied by four major competitors, Tesco, ADSA, Sainsbury's and Morrison, they all gain competitive advantages on their competitors. Sainsbury's gain advantages through their convenient store to increase the customer base.
Threat of entry:
Supermarket industry in the UK is very large and competitive, required huge amount and large infrastructure. Moreover a company required brand name along with core product to attract customers in the market.
Threats of substitute Products:
UK retail industry is very competitive, each of them has substitute products to sustain them in the market and fight back with their rivalries. Customers are vey fussy and conscious about the products due to high competition and wide range of choice. For example sandwiches sold by Tesco, Sainsbury, ASDA and Mark & Spencer are relatively same in shape and size but just different in price and taste (ProQuest 2010).
Power of Supplier:
Sainsbury's has strong bargaining power to their supplier due to brand name and good position in the UK super retail market. According to Kotler (2006) Companies who has ruling power and can dominate the market to large extent can have higher abusing power to their suppliers to offer them lower rate.
Power of Buyer:
In the UK due to increasing number of super retail chain and price war going between the supermarkets, customer has advantages to switch from one to another. Moreover wide range of products and most of the supermarket are located closely to each other give opportunities to consumer to move to their competitors. Further Customer can also switch loyalty from their existing company if they find some difficulty or unhappy from the offered services (Blythe 2006).
Sainsbury's SWOT Analysis:
Great quality food
Excellent customer services and facilities.
Value for money
Leading brand store in the UK
Various range of choice
Price is higher than others competitors
Limited growth outside town, few numbers of stores than Tesco and M&S.
Limited Non-Food Products
Expansion of internet shopping and local store and Non- food product line.
Market is changing with Trends; explore in the market by developing organic foods products and others.
More Employment opportunities.
Store infrastructure and brand name helps to introduce new product in the market.
Increasing in carriage cost.
Huge competition with other super markets.
Hit of global recessions.
"Marketing is the social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others." (Kotler 2005). Further Marketing mix is a combination of advertising, quality, promotion offer, coverage etc. All these consider important source to analysis the target market. McCarthy (1960) initiated that the combined tools are categorized into 4ps such as product, price, promotion and place.
The business has to gather successive information to make the marketing mix successful:
Correct component of products - e.g., high-quality and healthy.
Reasonable Price- e.g., Consumer buy products if realize there is good profit, value for money.
The product must me correctly placed with specified time and right position- an effective operation plan ensure these strategy, to place where and when.
Successful promotion- It helps to analyse and initiate the target of existence product in the market to increase profit over the driven cost and also make the product successful.
According to Kotler (2005), "Product means the totally of goods and service that the company offers the target market." The product must be design so well, to provide customer value and can be significantly divided into three levels such as core, actual and augmented product.
According to Kotlar (2006), "the most basic level is the core product, which address the question of what is the customer really buying?" Core product helps to satisfy customers need and wants; hence it is not actual tangible product. Sainsbury's core products are Fresh Food and Fresh Vegetables.
It is segmented into five different parts such as variety, quality, features style/ design, packing and brand name.
Product varieties: Sainsbury's have range of variety products under good brands, which are well known as foods, vegetables, groceries, drinks, kitchen appliances electronic goods and appliances, games, music-video, toys-utensils, sports and leisure (Sainsbury 2010)
Quality: Sainsbury's maintain quality of food very tasty and crispy and fresh and further it's also distinguish them into different categories like; Sainsbury's basic, kids, taste the different, organic etc. In January 2010 Sainsbury's has re-launched new products, 'be good to yourself', under this more than 60 new line of products introduced. The concept of these new products is to make healthy choice without compromise on taste, reduced fat. Thus Sainsbury's quality products and services help to lead competitive advantages on their competitors (Euro monitor 2010)
Style/ Design: Sainsbury's offers new environmental friendly store, style lay out for the products, grouped together on the shelves of different items, huge car parking, 'taste the difference' etc tasty and healthy food, latest design for their consumer such as electronic items, toys, games and kitchen accessories.
Packaging: Sainsbury's using own brand logo, own label packaging, rebranding on the products to distinguish them from their competitors.
Brand: Sainsbury provides a range of well-known products and own brand on medium and competitive price to provide quality of goods and service. To ensure the company brand image, brand loyalty, Sainsbury's introduced nectar card so they can easily trace their existing customer taste and demands.
Augmented products are falls in between actual and core product. The main features of this product to provide complementary consumer benefits and services. For example when a new products launched in the market consumers always like to watch before buying that what is the benefits for them to satisfy their needs.
Complementary products advantage:
It can be enhanced with add-on products on the main products. Sainsbury's provides such product, easy to use for example photography and camcorder carry bag use to enhance for better styling for mobile accessories (Sainsbury's 2010). Again guarantee on products gives added advantages, Sainsbury's guarantee policy for customer is very straight, replace or repair without obligations, further return policy depends upon the products standardized. Moreover the company service and support assistance online and over the telephone enhance the product advantages (Mintel 2009).
Competitive Pricing: The price war in the UK supermarket retail chain leads to competitive pricing strategy. Sainsbury's offers variety of products at fair and medium price.
Sainsbury's basics product: Sainsbury's offer 700 different products at very low price; it provides quality and value for money. The basic product comes in various shapes and size.
Sainsbury's for the kids provide more than 75 products are very fresh and healthy at very low price (Sainsbury's 2010).
According to Kotler (2005) states that "Place includes the company activities that make the product available to target consumers." For marketing mix place is consider as very important platform because it will define to buy and selling of goods. Consumer always looks for a comfortable place to buy goods at competitive price.
Main Mission Outlet:
Sainsbury's has 275 classical supermarkets, generally target weekly family shop. It has 500 plus food and non-food items out of which 20% shares occupied by own products. The product range includes from Basic to Organic and Taste the difference to Non-food lines such as home appliances, kitchen appliances etc.
Main plus Outlet:
It is known as 'Sainsbury Save Center', which includes a wide range of groceries and non-food products. Sainsbury's has 64 Main Plus outlet is also known as Hypermarket because the store is internally branded with Main Plus products.
Mixed Mission Outlet:
Sainsbury's has 124 Mixed Mission Outlet in the form small super market and convenience stores. They are generally located in urban town and cities with 300 plus mixed mission products.
Home delivery service:
Sainsbury's introduced online services to the busy customers, who cannot reach to their stores due to hectic schedule of work so they can pick up the products and get delivered to their home. The online shopping consists of all range of food products and available to 100 stores to more than 75% of UK populations. The customer makes payment through debit or credit cards. (Sainsbury's 2010)
It is very important for retail business; Sainsbury's promotes their business in different ways
Kotler (2005) define that 'Sales promotion includes a wide variety of promotion tools designed to stimulate earlier or stronger market response' It can be stated as 'Push and Pull' strategy.
Push Strategy involves personal selling and promotions to 'Push' the products through distribution channel to the consumers.
Pull strategy help to acquire customers to 'Pull' the product from the manufacturer through marketing channel.
Sainsbury's is earning fame through the sales promotion strategy. For example Sainsbury's "schoolbags" promotion is an example Push Strategy that achieved organizational goal (Mintel 2008). Again point on purchase (POP) through Nectar Cards especially on special occasions and special offer such as bank holidays etc giving double points on purchase to encourage customers to buy more (Sainsbury's 2010).
It is one of the important medium for marketing mix tools. A good advertisement creates impulse and havoc demand for product in the market. Sainsbury's summer 2010 sales promotion leaded by celebrity "Chef Jamie Oliver" create huge demand of garden parties and barbecues product in the summer holidays to attract consumer. It further excites them to buy items from Sainsbury's super market. (Mintel 2010). According to Kotler (2005) Online and offline advertisement such as consistent message deliberately promoted of £5 off to first time online purchase. 'Sainsbury's to You' home delivery services incorporated such communications to their loyal customers.
Brand awareness is very important for supermarket retail chain. Sainsbury's create their brand by spreading message through fresh, tasty and safe food to their customers. Moreover it also helps the company to gain competitive advantage. Sainsbury's also promote their brand message through online and social media to attract new consumers (ProQuest 2010).
Nectar at Sainsbury:
Nectar card helps consumer redeemed points with petrol from Sainsbury's Fuel Stations. For example £1 spending in the store is equivalent to 1points and is equal to 1litre of petrol. Sometimes, on especial occasion Sainsbury's provide double nectar points on purchase from the store through nectar cards. Customer can also avail nectar points from online purchase including play.com, Amazon, eBay and over 400 retailers in the UK. On the hand Sainsbury doesn't provide points on certain products which includes baby products, tobacco, Kiosk, gift vouchers etc (Sainsbury's 2010)
Summer / Special occasions:
The company provide special offer during such period to attract existing and new customers to buy more. The offer include price cut, half price, buy one get one free etc on some special products and drinks in the store (Sainsbury's 2010).
In-store Hot offer:
Sainsbury's provide excellent and exciting offer to their customers every week, especially on weekend to enhance their sell because in the UK the lifestyle is very hectic and most of the customer get free on weekend, moreover they love shopping with their families. Offer like half price Buy 1 get 1 free attract consumers more buying power at fair price.
Sainsbury's Active Kids:
Sainsbury's introduce Active Kid product in the market to attract young and adult children because in UK obesity level has increased, people love spending on eating foods. This products help to reduce obesity and gives healthy eating and active. It also helps to enhance competitive advantages to their competitors (Sainsbury's 2010)
Technology has change the habits of consumer, people like buying online to save time and money. Sainsbury's online buying power helps consumers to choose more conveniently from their home a range of products according to their availability by clicking the item from the catalog on desire date and time for delivery. (Sainsbury's 2010)
Definition of New Product Development: According to (Ulrich T and Eppinger D 2004) It is a whole process of launching new products or service in the market. The procedure is divided into two ways; idea generation, product design and detail engineering and further the procedure classified into market research and analysis. Organization analyze the product life cycle before launching the new product and later on commercializing the same process to increase the market share.
Objective of NPD: The objective should include:
Time of launching
Plan for safety and testing
Full list of advantages
Opportunities for releasing
Objective for budgets and finance (Ulrich T and Eppinger D 2004)
Marketing concept and frame work process:
Idea Generation: Usually called as 'Fuzzy front end' of new product development process.
Swot analysis can be the basic research for new products.
The Idea of new product generate with the Opportunity Analysis.( Koen et al 2001)
Idea Screening: is a concept which eliminates unsound objects. Some questions should be asked in this process:
Is there any target market lies which could benefit from the product?
What is the approximate size and growth of the target market?
Is the product could be profitable when it delivered to the customers?
Concept Development and Testing: is the framework where a product can be developing in the marketing and engineering details.
What is the reaction of the customers?
Is the product really cost effective to gain the market advantage?
Need to define the target market and the decision maker in the purchasing process.
Need to estimate the selling price, which could base upon competition and consumer feedback.
Estimate the sales volume of the market size and it can be based on Fourt-Woodtlock equation tool.
Calculate the break-even point.( Smith G and Reinertsen G 1998)
Build up a prototype of the proposed product.
Need to test the product packaging.
Checking the necessary adjustment where needed.
Need to launch beta product and keep on eye about its customer acceptance.(Cooper G 1988)
Set up a new program imitation.
Finalize the system of quality management
Publish the estimate
Need to produce the technical communication such as data sheets.
Draw the logistic plan and supplier collaboration,
Review the whole program and monitoring
Keep an eye about the department scheduling
Promotion after new product development:
Launch the final product in the market.
Promote their new product through advertisements.
Need to fill the distribution pipeline with their recently launch product.
New Product Pricing:
Impact and customer demand on the new product portfolio.
External and internal value analysis
Need to define variable and fixed cost
Also need to classify the Price, value and need of the new product.
Sainsbury's is one of the largest leading super retail chain in the competitive UK market. The market is captured by four strong retailers namely, Tesco, ADSA, Sainsbury and Morrison. Recent financial crisis, global recession, unemployment, increase in VAT threatened the supermarket sales to think more innovative. UK food retail market is very dynamic, keep on changing very fast because consumer taste is changing very quickly, they are aware of more health conscious and tend to move towards organic foods and environmental safety products. To save time and money, they would like to buy most of the things online or look for a place where they can buy varieties of products in competitive price. If we analyze the Sainsbury's 4Ps then it has great potential to capture the market from its pioneering thinking. The new product launched by the company in the market such as "eco friendly milk bag & jug"(guardian 2010) and invention of "Taste the Difference Delsanne pears" (j-sainsbury's 2010) may have competitive advantages on their rivalries. Sainsbury's has done lots research before releasing the products in the market, because it has to undergo a static review, a particular marketing concept and framework. Moreover company launches new "Gold Credit Card" (Thisismoney 2010) can boost the brand image upward and may give double advantages on the selling performance.