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Sainsbury’s-Asda merger – The growing impact of eCommerce on the Retail Industry in the UK!

Last updated on May 2, 2018 by Dotsquares

This week it was globally announced that there will be a mega-merger of supermarket giants Sainsbury’s and Asda, the worth of which is estimated around £12bn, and it’s created quite a sensation in the media. All eyes are drawn towards the proceedings about how it will unfold, what will be the role of the competition and market authority, and how is it going to affect the consumers. The most significant effect of the merger, however, will likely be on the jobs of the supermarkets’ employees.

To brush off the growing concerns over the subject, Sainsbury’s head Mike Coupe has released a statement that he will not cut shop-floor jobs or close any stores because of this merger. It is notable how Mr Coupe has carefully chosen his words to not include all the jobs in his promise.

It is evident, however that this statement cannot be taken at face value. Many of the administrative jobs will become redundant post-merger, and that will consequently lead to a change of responsibilities or a release of certain roles. Furthermore, the sheer number of the outlets these supermarket chains have (630 retail units of Asda and 1,412 of Sainsbury’s) is predicted to get significantly reduced, due to the merger on limiting the choices of the consumers.

It is clear that this merger is going to have some remarkable effects on all the parties concerned, and a lot of speculation has already taken place already. However, little attention is being given to why Sainsbury’s is taking this huge step.

Is eCommerce the Leading Factor for the Merger?

In a recent report published by The Guardian, Amazon was accounted as one of the biggest successes in industrial history. The report above states that Mr Coupe has never kept his concerns over the online retail giant a secret. He has even admitted that the 2016 purchase of Argos too was led by the threats presented by Amazon. Therefore, it is not hard to imagine that the growing strength of the latter is the chief reason for this merger as well.

What’s more interesting is that Amazon is not the only concern for the likes of the ‘brick and mortar’ retail industry in the UK. In our previous post on IoT’s impact on the Retail industry, we have discussed how stand-alone stores have had really slow growth in the past five years or more, and this is directly in proportion to the industry’s gradual increase in the digital world. It seems research conducted by Local Data Company (LDC) for Price water house Coopers, has also reached the same conclusion with some other concerning findings.

As per the research, around 5,855 stores were closed in the UK’s high streets in 2017, which is the record highest number since the beginning of the research series in 2010. Furthermore, most of these stores were fashion retailers and travel and real-estate agencies, the two industries that represent the largest parts of internet shopping. Another factor that points to the rise of eCommerce for the decline in brick-and-mortar is the visible net-growth in the other physical commerce institutions like beauty stores, cafes, and ice-cream parlors.

Other Severe Changes Driven by the Growth in eCommerce

Though eCommerce, in the near future, may not be able to eliminate the brick-and-mortar concept completely (Amazon Go is a proof of the fact), it would be naive to think that it does not have any telling impact on the same. In this regard, the chief executive of an independent economics research consultancy- Retail Economics, Richard Lim, has said “The number of people employed in retail has been shrinking by 1 percent per year since 2008. The industry doesn’t require as much space and the role of employees is changing.” This number, though, quite depressing in itself, it is nothing compared to the other fact revealed through a report by The Scotsman.

More than 21,000 jobs in the UK’s retail industry were axed, just in the first three months of the year, and a large part of this figure belongs to the prominent high-street chains like Maplin, Toy R Us, New Look, and Bargain Booze.

The growing wave of digitization has begun to take the form of a major employment devourer. Though newer jobs are being created every day, the dearth of required eligibility amongst experienced professionals is yet another issue that remains unresolved. Much of these issues can be answered using advanced training programs, but it all requires a lot more resources and means than what most companies have at present.

Therefore, the time has come, to reevaluate our means of industrial education, and to bring more aspirants to join the mainstream unravelling of this tech revolution, or else the price will soon become too expensive to fork out for the whole of the economy.

Resources:
https://www.independent.co.uk/news/business/analysis-and-features/sainsburys-asda-merger-latest-updates-store-closures-job-loss-locations-a8329451.html

https://www.independent.co.uk/news/business/comment/sainsburys-says-asda-merger-a-great-deal-for-everyone-can-customers-believe-that-a8329161.html

https://www.theguardian.com/business/2018/apr/11/tough-year-high-street-internet-shopping-weak-pound#img-1

https://www.scotsman.com/business/companies/retail/high-street-left-reeling-as-21-000-uk-jobs-lost-1-4717310

https://www.theguardian.com/business/2018/may/01/sainsburys-growth-rivals-adsa-tesco-morrisons

https://www.theguardian.com/business/2018/apr/30/why-amazon-is-driving-force-behind-asda-sainsburys-merger