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The Effect behind the Merge of Sainsbury’s and Asda

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The Effect behind the Merge of Sainsbury’s and Asda

The merger plan between Sainsbury’s and Asda has become the hottest topic for few past weeks in business world. Both of them can be considered as the bigger chain supermarket company in the world. Asda itself is owned by also one of biggest supermarket chain, Wal-Mart. From many business experts’ perspective, both of them are fit each other. Therefore, the merging plan won’t affect their status one or another. In fact, this plan can be considered as the best plan both company can use to win the competition in this field. Moreover, this plan is necessary.

According to few sources, Sainsbury’s and Asda have been pressured by the existence of cheap price supermarket, like Aldi and LIdl. Both of them offers cheaper groceries product, which is the product that all people need every day. More than that, Amazon also tries to enter this groceries field as well. This means if they didn’t do the merging plan, there is possibility that they will lose big percentage of market.

Steve Dresser, director of the Retail Insight Consultancy also said that Sainsbury’s and Asda has slow grow rate if they keep their position as today. When he sees it from a market share perspective, other company like mentioned above has better growth rate than these two giant supermarket chain. So, merging plan is something that is unavoidable.

On the other hand, Sainsbury’s and Asda are actually complementing each other. Sainsbury’s is the store that aims for the higher-end market segment. Their operation area is also different than Asda, where Sainsbury’s operate in Southern UK. On the other hand, Asda operate on the North UK and aim for budget consumer by providing cheap groceries product. Mr. Dresser said with this merging plan, Sainsbury’s and Asda will be able to solve their problem, regarding the operation area and product catalogue, as well as retailer problem. Plus, with this merging, they can at least survive when Amazon also decide to join this competition.

This combination also has possibility to take over the Tesco market share, which reach 30% of UK grocery sales. This number is definitely great push for both supermarkets to grow. However, there are worries on how this plan will affect the suppliers. With more power in Sainsbury’s and Asda hand, there is chance that they can press the supplier more. So, we might need to wait and let see what will happen with this plan in the future.

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