Tesco’s online sales have boomed, while some Sainsbury’s stores have been left with empty shelves.
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The latest news concerning UK supermarket market leader Tesco and rival Sainsbury highlights the main difference between them: it’s not marketing or brand positioning, but simply managing to get enough of the right goods on the shelves at the right time. Tesco’s supply chain works, Sainsbury’s doesn’t, and the smaller firm appears unable to fix its long-running logistics problem.
Tesco.com, the online grocery service of UK-based supermarket chain Tesco, had its busiest month ever in December 2004, fulfilling 600,000 online orders, equivalent to 2.5% of all UK households. The news comes just ahead of offline sales figures for December, which are also expected to show Tesco’s lead extended.
Meanwhile, rival chain Sainsbury’s, the top UK supermarket until the mid-1990s but now in third place, has admitted that some of its flagship convenience stores in central London were left without supplies of fresh food last week following a logistics failure. Although this will have no significant impact on profits, it is indicative of deeper underlying issues that need to be addressed.
Tesco’s success, both online and offline, has come through effective supply chain management. Tesco stores tend to be better stocked than those of its competitors, while costs are still kept down. As well as allowing the website to work effectively with orders fulfilled by store-based packers, this effective supply network has allowed Tesco to turn around the convenience stores that it purchased in recent years, cutting costs and significantly improving range, freshness and sales per square metre.
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By GlobalDataSainsbury’s failure comes from the same roots as Tesco’s success. Its strategy has been similar to its bigger rival, making the same attempts to leverage traditional supermarkets into the online space and the convenience store space. And in terms of marketing campaigns, product innovation and store development, Sainsbury has not significantly trailed.
However, as the recent debacle in London demonstrates, Sainsbury does not appear capable of executing this strategy effectively. On current evidence, there seems little reason to think that this will change – particularly as recently appointed CEO Justin King, whose background is firmly in marketing, has decided to focus on cutting spiralling supply chain costs rather than making further investments in fixing the systems.
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