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Blackfriar: How Sainsbury's successfully tapped into shoppers' psyche
The news that Sainsbury's is planning a big expansion into Asda and Morrisons' Yorkshire heartland raises the prospect that it has set its sights on reclaiming the number two slot from Asda.
Sainsbury's has confounded its critics under chief executive Justin King. Many thought it would fall flat on its face during a recession as shoppers fled to cheaper rivals.
But Sainsbury's has managed to steal customers from upmarket rivals M&S and Waitrose while also holding on to its own cash-strapped shoppers. The group's budget 'basics' range is seeing 50 per cent growth year on year – a staggering performance.
But Sainsbury's has very cleverly tapped into its customers' psyche.
Sainsbury's customers see themselves as foodies at heart and they wouldn't be seen dead buying Tesco's new discount range. While Tesco shoppers are happy to buy Country Barn Cornflakes, Daisy washing up liquid and Spring Force toilet roll, Sainsbury's shoppers just can't bring themselves to do it.
Which is why the 'basics' range is so clever. Take its 'basics' fruit and vegetables. The label tells shoppers that these lemons are just as good as any other lemons, but they don't fit EU directives on size and shape.
This is very reassuring to Sainsbury's shoppers – it reminds them of last year's Mediterranean holiday where the local lemons looked ridiculous but tasted wonderful. The Jamie Oliver's 'Feed your Family for a Fiver' campaign is another brainwave. If Jamie says its ok to slash the budget then it must be – he bangs on enough about healthy, conscientious eating.
So should Asda and Morrisons be worried? Probably not. Sainsbury's planning department will carefully site stores in the more affluent areas of Yorkshire, which is more likely to damage M&S and Waitrose than Asda and Morrisons.
n Back in July last year this newspaper predicted a wave of consolidation in the building society sector. But even Blackfriar did not expect events of the magnitude that subsequently unfolded. Finance has stumbled, blinking and dazed, into a new world.
Somewhere on the journey into this new world, the rules that govern building societies and mutuals were stretched.
Last week, on unveiling pre-tax losses of 48.8m, the West Bromwich Building Society announced a restructuring which allowed City investors to swap their 182.5m debts into profit participating deferred shares.
The omens have long been gloomy for the West Brom, whi-ch fell foul of the credit crunch with risky commercial and buy-to-let loans which soured.
So, in cooperation with the FSA, the West Brom came up with a way to retain its independence, strengthen its capital ratios.
These catchily-named shares are a new financial instrument of a type not seen before in the building society sector.
Crucially, they allow the 16 institutions access to up to 25 per cent of the West Brom's future profits.
Mutuals are supposed to be run for their members, with profits ploughed in to cheaper mortgages and higher interest rates for savers. The 160-year-old West Brom has broken the mould. Profits will now be shared with City institutions which have very different ideals to the society's 457,000 members. Other mutuals are now believed to be considering following suit.
Ultimately, Blackfriar believes this new form of goalpost-shifting was about the best the West Brom could have hoped for. It avoided the ultimate ignominy of doing a Dunfermline and being bailed out by the taxpayer.
But the West Brom's mutual status, and the very principles on which mutuals are founded, are looking decidedly shaky.
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Weather for Yorkshire
Wednesday 23 May 2012
Today
Sunny spells
Temperature: 11 C to 24 C
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