In the official announcement of Sainsbury’s plan to merge with Asda today, the grocer flagged technology and innovation as a key benefit of the deal.

The big four (soon to be big three?) grocer said that the deal would allow “the business to share knowledge and technology developments between Walmart, Sainsbury’s and Asda”.

It’s a deal that could have seismic implications for the UK grocery sector, the impact of which would likely reverberate across the pond to the US as well.

It also comes at a time when traditional grocery is facing more intense competition from a greater number of rivals than ever before.

“There’s a real drive for synergy and simplicity on one hand, and on the other the market is relenting so you’ve got to be innovative”

Brian Kalms, Elixirr

Whether it’s the discounters snapping at their heels, Amazon stealing market share or shoppers’ ever-rising expectations, there has never been a more important time for grocers to differentiate themselves from the competition – and technology could be the silver bullet in achieving this.

Elixirr partner Brian Kalms says: “There’s a real drive for synergy and simplicity on one hand, and on the other the market is relenting so you’ve got to be innovative and focus on changing customer-facing systems at the same pace or faster than your competitors, who won’t be weighed down with the implications of a merger and the complexities that come with it.”

So, if the deal does go ahead, which areas should the transatlantic grocery titan focus on to ensure technology is used to surpass shoppers’ expectations as well as drive sales and profits?

Delivery

One of the jewels in Sainsbury’s crown when wooing Asda and its parent company Walmart is likely to have been its recent acquisition Argos.

The tech-driven general merchandise retailer has rolled out a suite of delivery improvements for its shoppers in recent years, ranging from fast-track same-day delivery to reserving items for click and collect.

The rollout of Argos’ shop-in-shops in Sainsbury’s stores since the acquisition has caught the eye of Walmart International’s chief executive and president Judith McKenna.

“What’s really interesting is the way the inserts have worked,” she says. “It’s less about product and more about the seamless customer experience.”

“Learning from Argos’ fulfilment proposition is likely to be a key benefit of the merger for Walmart and Asda”

Rolling out aspects of Argos’ delivery services to Asda and perhaps even Walmart might be in the pipeline, as could opening more shop-in-shops across the three grocers.

TCC Global’s global insights director Bryan Roberts says: “One of the reasons’ Sainsbury’s bought Argos is because of its expertise in ecommerce and fulfilment, so Walmart will certainly be interested in best practice learnings from them.”

Kalms concurs that learning from Argos’ fulfilment proposition is likely to be a key benefit of the merger for Walmart and Asda.

“Argos has really made great strides, even before the Sainsbury’s merger, in getting that multi-configured supply chain in place. Walmart doesn’t have anything as sophisticated as that operating in the UK.

“The expectation of customers is around ease and flexibility of delivery and the mark has been set by online leaders there, so working with Argos is a good start.”

Innovation

Speaking at today’s press conference, McKenna said that one of the three key benefits Walmart would offer Sainsbury’s in the merger is its technological capabilities (alongside best practice and global sourcing).

The US supermarket giant has made a series of tactical moves in recent years to place itself at the cutting edge of retail technology implementation and experimentation, including the launch of its innovation hub Store No. 8 and acquisition of ecommerce disruptor Jet.com.

“Walmart does have a huge reputation as a vanguard of using technology systems to make itself more efficient and has been busy over the last two or three years acquiring as well as developing lots of innovation,” says Roberts.

“It’s likely that any deal would be as beneficial for Walmart as it would be for Sainsbury’s in innovation terms”

“There are huge learnings there that Sainsbury’s and Argos could use and lots of potential for them to benefit from some of that acquired innovation.”

However, it’s likely that any deal would be as beneficial for Walmart as it would be for Sainsbury’s in innovation terms.

The US grocery giant has benefitted from the learnings of its subsidiary Asda’s various click-and-collect trials, Sainsbury’s and Argos would bring further insights for the firm.

“The UK is one of the most advanced grocery ecommerce sectors in the world. In terms of direct-to-consumer ecommerce the UK is streaks ahead of the US,” says Roberts.

If Walmart’s recent appointment of former Tesco executive Simon Belsham as president of its Jet.com ecommerce business is anything to go by, the US supermarket chain is looking to glean a lot more insight from the UK grocery sector.

Supply chain

If the merger between Sainsbury’s and Asda goes ahead, the implications for its suppliers will be significant.

Sainsbury’s boss Mike Coupe has said the deal would deliver a 10% cut in prices across the two grocers as it leverages its scale to drive harder bargains with suppliers on everyday essentials.

Roberts flags that in order to drive efficiencies across the two grocer’s supply chains and empower its suppliers, Sainsbury’s may deploy Walmart’s Retail Link platform, which is a tool for suppliers to track products sales across Walmart stores.

“Retail Link is very, very impressive – the data exchange that Walmart offers with [it] offers a much greater level of visibility and predictability for and to suppliers, which Sainsbury’s and Argos could both benefit from,” says Roberts.

“Having more clarity of which product lines sell best and where will be vital”

As the supermarket chains look for synergies and consolidation across their supplier base, having more clarity of which product lines sell best and where will be vital.

Kalms stresses that from a technology perspective Asda, Walmart and Sainsbury’s are “sufficiently similar businesses that could look at their IT landscapes and say ‘where is the best we’ve got and is it feasible that it can be spread into the other businesses?’”

Whether it’s online, in-store or behind the scenes, there are myriad opportunities for this potential grocery powerhouse to collaborate.

The challenge will be assessing which technology will offer the greatest cost savings and customer experiences.