Judge and Jury: Sainsbury’s is falling behind in the realm of check-out chic - Sainsbury’s credibility is on the line after its recent warning of falling profits, says Fiona Driscoll, former CEO of Ogilvy Adams and Rinehart

In the game of City perceptions, Sainsbury’s is slithering down the slippery snake while competitors climb the ladders of leadership.

In the game of City perceptions, Sainsbury’s is slithering down the

slippery snake while competitors climb the ladders of leadership.

News of Sainsbury’s third profit warning in four years has been greeted

by shock, outrage, heavily critical media reports and the shares

spiralling into freefall.

Sainsbury’s is seen as having lost the race to its rivals. It’s been

outmarketed and outmanoeuvred.

Trading performance has been lacklustre. Attempts to expand into the US

have run into difficulties. The cost of integrating the DIY businesses

has proved far higher than expected. Sainsbury’s now scramble to follow

their rivals’ innovative marketing initiatives. But their biggest missed

opportunity was the failure to realise the significance of customer

loyalty programmes. When Tesco launched its Clubcard, David Sainsbury

derided the ides. Yet 15 months later they launched their own card and

it’s costing a fortune to catch up. The impression, at best is that of a

tactical muddle.

Clearly the root of the problem lies in the supermarket’s performance

exacerbated by poor presentation. The announcement at the end of January

that Sainsbury’s profits would fall pounds 50 million below expectations

came only a month after management had visited institutions with an

upbeat message. Such a dramatic about-face has caused considerable

embarrassment - rumours of a row with their bankers Warburgs are rife -

and management is being criticised for having lost the plot.

Some of this criticism is probably unfair. Market expectations were

probably too high, conditioned by years of Sainsbury’s leading the pack.

The company is profitable. Sales are moving back in the right direction.

There is a new management team in place.

Longer term, Sainsbury’s strategy of overseas expansion and taking the

sector into banking may come good. The heavy investment in marketing and

customer service may help them rebuild share, or at least hold their

position in the supermarkets league.

Sainsbury’s need time to rebuild their reputation. But to do this they

need to communicate a clear strategy, and to show some dynamism,

originality and leadership. Currently they are seen as complacent,

cautious and not in total control. With management credibility at an all

time low, there is a major task ahead.

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