Sainsbury's reported its sixth consecutive decline in quarterly revenues this month, with non-fuel sales down 0.6% in the 12 weeks to June 6 – and down 2.1% on a like-for-like basis. Like all the other major players in its sector, the supermarket is suffering from food deflation and enhanced competition – both from the premium and budget ends of the market.
'Trading conditions are still being impacted by strong levels of food deflation and a highly competitive pricing backdrop,' said its chief executive Mike Coupe. 'These pressures, including the effect of our own targeted price investment, have led to a fall in like-for-like sales for the quarter.'
Price is clearly one factor in holding onto market share. It seems like Aldi and Lidl have changed the grocery game for good, and customers are continuing to demand more for their money. But analysts at consultancies Retail Remedy and Planet Retail agree that its old rival Tesco is also massive threat, as it bounces back from last year's accounting scandal.
Sainsbury's needs more than the right prices to see off this challenge. It can't beat Tesco, let alone Aldi or Lidl, in a race to the bottom. A focus on quality – and on branding – is equally important. Coupe points out that he's spending money on improving 3,000 own brand products, but that might not be enough on its own.
'They just need to re-establish the compelling reason to shop at Sainsbury’s which was always about quality,' said Phil Dorrel, a partner at Retail Remedy. 'They still have that quality, they just don’t shout about it anymore. Sainsbury’s marketing is too forgettable. With the exception of the Christmas chocolate bar advert, the marketing has done nothing to drive much needed footfall into the stores.'
Retail Remedy was particularly scathing about Sainsbury's Tu clothing range, which seems like a wasted opportunity. 'Online the range looks strong, fashionable, very well priced and presented in inspiring outfits,' it said in a blog post. 'In store however it looks like an afterthought: the merchandising is lazy and often obstructed by sale rails.'
As an aside, this amusing case of mistaken identity, which has this week got legions of UKIP supporters calling for a Sainsbury's boycott for its supposed support for remaining in the EU, won't exactly have helped on the branding front either.
It might be a big ask to see Sainsbury's return to its noughties heydays, when it benefited from both the leadership of Justin King and the publicity of celebrity chef Jamie Oliver - who made 100 ads for the supermarket over 11 years. But Coupe needs to seize the opportunity to reaffirm Sainsbury's position in the market if he wants to avoid being labelled the boss who dragged the supermarket to the bottom.