As Sainsbury’s general merchandise grows at twice the rate of food, the grocer is opening a new distribution centre to keep up with mounting demand. Laura Heywood gets the low-down

Sainsbury's is the UK's sixth largest retailer of homewares by value

The fact Sainsbury’s sells more baking equipment than any of its competitors is less a reflection of its shoppers’ penchant for ‘soggy bottoms’ and the dulcet tones of Paul Hollywood, than it is of the grocer’s well thought-out push behind a handful of non-food ranges that are right on trend.

Focusing on the so-called hero categories of ‘seasonal’, ‘cook shop’ and ‘paper shop’ has paid dividends for the grocer, which earlier this month revealed its general merchandise business achieved record levels of market share in its third quarter.

In the 14 weeks to January 4, the grocer recorded growth of more than 25% in tableware and nearly 30% in gifting, boss Justin King disclosed at Sainsbury’s third quarter trading update. In fact, Sainsbury’s is now the UK’s sixth largest retailer of homewares by value, King reported.

And that’s not the only accolade the grocer is shouting about when it comes to its non-food offering. Last year its clothing and general merchandise range achieved annual sales of more than £1bn.

Such strong growth is down in part to the retailer’s complete rethink of its non-food offering - both in store design and range. Wider aisles, lots of displays and merchandising more akin to a department store are encouraging shoppers to stop and browse, according to Roger Burnley, Sainsbury’s managing director of general merchandise, clothing and logistics.

Under pressure

The grocer has been working hard on its own-brand general merchandising ranges, opening sourcing offices in Hong Kong and Bangladesh, as well as developing its brand architecture around a ‘good, better, best’ proposition.

The grocer’s non-food business has “come of age”, Burnley told Retail Week last year as Sainsbury’s unveiled its rejuvenated offer. “We’re making a substantial investment into non-food. With a 143-year food heritage, it would be remiss not to take some of that into non-food,” he said.

While significant growth in general merchandising has been an important contributor to the retailer’s bottom line, it has also put a strain on Sainsbury’s existing distribution centres. In an effort to alleviate such substantial pressures, the grocer has begun work on a new distribution centre to handle all its UK general merchandising.

Operated by DHL, the new 1 million sq ft facility in Daventry, Northamptonshire, will open in 2015, with low bay operations commencing early in the year and a 150,000 pallet high bay operation following later in 2015. It marks the 29th year of the relationship between Sainsbury’s and DHL, and will create more than 900 jobs.

Handling all UK general merchandising including cookware, homewares and domestic appliances, the distribution centre represents “a significant investment for Sainsbury’s”, according to logistics director Richard Fleming.

“We’re always looking at ways to serve our customers better and this depot will provide us with a central location to support our growing general merchandise business,” he says.

As well as facilitating further anticipated non-food growth, the distribution centre will support Sainsbury’s green commitments with a range of eco-friendly initiatives. Mel Brockhouse, vice-president of retail operations for DHL Supply Chain, explains: “In line with Sainsbury’s 20x20 sustainability targets, the facility features the latest environmental technologies including LED lighting rainwater harvesting and vehicle charging points in the car park.” It will also recycle or put to positive use all its general waste.

Locating the distribution centre in Daventry, beside the M1 motorway and the West Coast Mainline railway, not only provides Sainsbury’s with a “central location” for storage and dispatch, as outlined by Fleming, it also ticks the grocer’s sustainability boxes.

The location has both road and rail operations, with a new intermodal terminal connected to the existing Daventry International Rail Freight Terminal (DIRFT). This “plays to the green agenda”, Brockhouse explains, and will result in significant CO2 savings by removing trucks from the road. “It means being more efficient in terms of handling and taking miles off the road from a distance point of view,” he adds.

At Daventry both automated and conventional assembly methods will be employed. Automation in the distribution centre is “highly efficient in terms of meeting the peaks and troughs associated with distributing a product,” according to Brockhouse, and will enable Sainsbury’s to better meet the demands of seasonal trends.

Automatic response

In the past Sainsbury’s has benefited from major investment in automation, which is evident at its distribution centre in Bedford. It ploughed £20m into automation when the site opened in 2010. Distributing Sainsbury’s Tu clothing line (see box), the site is 50% automated, resulting in 2.42 million units being processed in a peak week. The grocer hopes to increase that figure to 3 million in the future, demonstrating just how important first-class automation can be to efficient processing and why it will be such an important component at Daventry.

Brockhouse also points to the use of cutting-edge order fulfilment systems in the Daventry centre, such as pick-to-light, which uses light indicators attached to shelving, pallet racks or other storage. When a product is needed from a particular location, the indicator turns on, drawing attention to where action is required. The operator picks the product quantity displayed and confirms the pick by pressing the lit button. The system “gives higher rates of efficiency” compared with other conventional methods, according to Brockhouse.

While the official opening of the new distribution centre is still a way off, hopes are high that such investment will lead to further growth for Sainsbury’s already strongly performing non-food division. And with King’s target to deliver about 1 million sq ft of new store space by the end of 2014 “on track”, the need has never been greater to get popular lines processed and onto shelves as speedily as possible.

Focus on: Tu distribution

Along with general merchandise, another crucial component of Sainsbury’s recent push to build non-food sales is its Tu clothing line. Relaunched in September, the new-look clothing range went into 395 stores, accompanied by a marketing campaign with the strapline ‘Live Your Style’.

Originally launched in 2004, Tu is now the UK’s seventh largest clothing brand by volume. In 2010 Sainbury’s opened a second distribution centre in the Sainsbury’s network to keep up with distribution demands for the clothing range. In 2011, the Bedford site dispatched more than 42 million garments, and it now dispatches 50 million garments every year. 

The site operates 24 hours, six days a week with about 450 staff. It has implemented the RedPrairie inventory warehouse optimisation tool. “RedPrairie has been introduced into Bedford and across most Sainsbury’s warehouses to give them a more consistent and effective way of controlling stock and greater visibility,” Brockhouse explains.

The Bedford distribution centre has also recently implemented a hanging automation system ensuring it has the capacity to meet future growth aspirations.