Sainsbury’s fourth-quarter trading statement gives an inkling of how its business transformation programme has taken hold so far.
The company’s sales grew 1.4 per cent over the year, but after stripping out changes made to the selling space within stores, sales actually fell by 0.2 per cent.
The result is a bitter blow for outgoing chief executive Sir Peter Davis, who leaves the post as the market’s confidence is plummeting.
In its trading statement, the grocer blamed the poor sales on the huge technology overhaul it has been going through for the past three years.
The transformation project - outsourced to Accenture until 2010 for about £2 billion - focuses on three areas. It has overhauled the way in which Sainsbury’s stores customer data, so it can more easily segment them into useful clusters and predict shopper behaviour across its estate.
It has also upgraded its EPoS systems, consolidating about 15 separate platforms into one. Finally, the company is in the process of automating its supply chain.
The EPoS and supply chain initiatives will have made an impact on the £250 million cost savings. However, it is probably the EPoS implementation that has slowed sales, as stores get used to the new systems.
In future, as Sainsbury’s turns its attention to competing with retailers such as Morrisons and Asda on price, the customer data warehouse should enable it to identify the right prices for its product range to drive the volumes of sales it needs to make a profit.
In a statement, Sir Peter Davis said: ‘We have previously indicated that when our modernisation programme is behind us, we will be in a position to invest more in price and quality in order to drive sales growth. We will also begin to get the benefits of a modernised supply chain and new IT platforms.’
However, one analyst has warned about being over-dependent on new technology.
Paul Mason, founder of analyst house Paul Mason Consulting, said: ‘Sainsbury’s has some great technology tools, but unless they have the people in place who can take the data and make the right decisions, they aren’t going to get very far. I would say they probably haven’t done that yet.’