Sainsbury’s boss predicts a rise of ‘retail alliances’ after making formal £1.4bn bid for Argos

The chief executive of Sainsbury’s has framed a potential takeover of Argos against the rise of “more imaginative solutions”, including the merger of retail giants, to solving the conundrum of serving today’s promiscuous and increasingly digital shoppers.

His comments came on a press call after the grocer made an unchallenged £1.4bn offer to buy out the Home Retail Group – owner of Argos – earlier today (18 March).

Sainsbury’s interest in buying Argos first emerged last year, with boss Mike Coupe revealed it would “expedite” the grocer’s omni-channel plans. Since then, Morrisons has inked a deal with Amazon leading analysts to speculate whether there could be a spate of so-called ‘retail alliances’ as traditional bricks and mortar retailers try and buy into the tech, delivery infrastructure, and scale that the likes of Argos and Amazon offer.

“It’s a recognition as we look forward customers will demand more of any retailer,” said Coupe.

“Part of the commentary which has been driven by Morrisons and Amazon partnering has started to propagate the idea that different forms of alliances will emerge over time. I wouldn't be surprised if you see more imaginative solutions to serving customers."

Coupe’s prediction of “more imaginative” retail solutions reflects the challenge he and his peers face in figuring out how to draw people to stores. And while no retail boss would publicly admit to Amazon taking their lunch, growth has been hard to come by due to changes in the way people shop, that smaller grocery businesses – both on an offiline – have been able to exploit.

Looking at Argos then, Sainsbury’s of the mind that it could be the silver bullet to elevating its online business. Argos turned heads last year when it achieved £1bn in mobile sales in little over 12 months, an enviable stat for any retailer let alone the country’s third biggest supermarket, which has made no secret of its omnichannel ambitions.

Driving people online is an important move in today’s grocery sector now that FMCG brands are more actively trying to boost ecommerce sales, with it being used as a way to swell market share.

Sainsbury’s potential online was for all to see earlier this week (15 March) when it revealed a 14 per cent rise in online sales pushed it to post its first quarterly sales rise in two years. Like-for-like sales were up 0.1 per cent in the period, an uptick on the 0.4 per cent drop it revealed in the previous quarter. At the time, Coupe hailed a move away from promotions to lower prices across its ranges for the rise as it joined Tesco and Morrisons, which both reported gains in the quarter.

Jennifer Faull

The Drum senior reporter Jen Faull provides news and insight on the latest developments in retail and FMCG.

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