The Sainsbury Take on What makes Consumers Tick

Sainsbury’s half year results were announced this week and showed good growth in sales and profits. The company has now increased its sales for 35 quarters in a row, something that none of the other “big four” players have done and so when CEO Justin King speaks about what consumers want it is worth a listen.

 When presenting the results King said that the better economic mood in the country has yet to be felt by consumers in their pockets and so Sainsbury’s business plan assumes that household incomes will remain flat to declining over the next two to three years.

Equally striking is his overwhelming belief that, despite the economic pressure, British consumers are driven as much by ethical values as by price. He sincerely believes that Sainsbury’s success can be put down to fairness in dealing with suppliers, high standards of food quality and traceability, (interestingly Sainsbury was not tainted by the horsemeat scandal), and attention to animal welfare, (where they have for years supported RSPCA Freedom Foods, Fair Trade bananas, free range eggs, and Marine stewardship Council fish).

King is convinced that British consumers stand right behind him on this. Which explains why, despite being knocked back twice in the challenge on Tesco’s price promise, Sainsbury are again going to the courts to claim that when comparing prices, issues such as animal welfare and Fair Trade have to be taken into the equation. 84% of consumers apparently agree with him.

According to King this commitment to values applies to supplier relationships. Speaking on the day when Prince Charles took a swipe at rapacious retailers who deal unfairly with farmers, King stated categorically that Sainsbury’s supplier relationships are totally fair.

The commitment to ethical values is an overarching strategy, and it is accompanied by a commitment to financial value in the shape of Brand Match, the scheme whereby consumers get a coupon if their branded purchase would have cost less in one of the other big four retailers. Beyond this, the Sainsbury route to winning consumer spend lies in investment in convenience stores, online shopping, and Sainsbury’s own brand where of course they can display their values credentials to best effect. In the last 6 months sales through convenience stores have grown by 20%, online by 15% and sales of mid range By Sainsbury and Taste the Difference food brands are growing at twice the rate of national brands. They will continue to invest in their Nectar card which they believe allows tailor made promotional activity directed at individual shoppers and is thus more relevant than competitors who use loyalty cards to promote to groups of people.

Cynics might say that there is no such thing as a major retailer who is fair to suppliers. Cynics might also say that it is price alone that matters to consumers and Sainsbury just happen to be on a winning streak because Tesco, Morrisons and ASDA are going through a difficult time.

But, 34 consecutive quarters of growth mean that Sainsbury must be doing something right – something that resonates with consumers sufficiently strongly to make them shop there on as regular basis.