Aldi and Lidl are the fastest growing supermarket discounters, (whose share of the grocery market has rocketed from less than 4% a decade ago to nearly 13% today). They have become a threat to all the traditional supermarkets. However, the supermarkets biggest fear is Amazon.

Sainsbury’s has made it clear that Amazon is the supermarkets biggest concern. It’s now the world’s second biggest company and is valued at $740 Billion.

The online retailer has already entered the grocery business as last year it paid $13.7 Billion to take over US grocer, Whole Foods Market. Amazon has also created Amazon Go, which is a “shop and go” food store which allows Amazon’s customers to pick up their shopping in the store, walk out with their groceries, and pay online! This is appealing to Amazon’s customers as it allows them to shop efficiently, making their lives easier – which is another reason why traditional supermarkets feel threatened. Moreover, Amazon also has a deal with Morrisons to provide UK customers with their shopping using Amazon’s “Pantry and Prime” service. No wonder Sainsbury’s is concerned.

But what can they do about it?

The recently announced merger between Sainsbury’s and Asda (part of Walmart) certainly allows Sainsbury’s to have more buying power which in-turn then allows the supermarket to secure better deals with suppliers. The aim of this, of course, is to compete with Amazon on price. Also, as Walmart has just made huge investment in digital Innovations it would mean that the new Asda-Sainsbury group would benefit from this. Their digital innovations include a smartphone shopping app and automated parcel pick up machines for online shopping.

Walmart has also started to look at a way to tackle Amazon in the US. However nothing has been particularly forthcoming as yet. An investment director at US stockbroking firm AJ Bell was quoted as saying that Walmart is not confident that it can stop the increasing threat of Amazon:

“It is hard to believe that a company with $500bn in annual sales has a reason to be frightened of anyone, but Walmart has its competitors too,” he said. “Amazon’s acquisition of Whole Foods suggests it may be about to start attacking the grocery market … Only time will tell but Walmart is not waiting to find out.”

The Asda-Sainsbury’s merger could help add another weapon to Walmart’s arsenal. Their international boss, Judith Mckenna, claims the merger will decrease the threat from their competitors in and out of the UK. She has suggested using Sainsbury’s partnership with Argos to create an efficient alternative to Amazon’s large warehouses. Sainsburys has benefited hugely from their partnership with Argos by putting dozens of Argos outlets into their supermarkets and providing fast deliveries for their customers. Walmart is now considering Argos in the US and other areas to help fight of the threat of Amazon more effectively.

Watch this space!

 

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