Q&A
Q What will it mean for shop prices?
A The two supermarket giants have pledged to invest the cost efficiencies generated from the merger into lower prices. Sainsbury’s expects to save £500 million from merging with Asda, and has said it will lower shop prices by 10 per cent on everyday products.
However, this could have more widespread implications for shop prices if discounters Aldi and Lidl decide to cut their prices even further to stay ahead of their main market rivals.
Q What will it mean for stores?
A The Competition and Markets Authority (CMA) will soon start its investigation of the proposed merger, raising the prospect that Sainsbury’s and Asda will be forced to sell off stores if they directly compete in local areas.
Sainsbury’s initially insisted it does not expect to shut any stores, but later said it may be forced to offload outlets by regulators. The supermarket says its store footprint is more focused on the south, and Asda has more stores in the north.
Q What will happen to Argos?
A Sainsbury’s bought Argos in 2016 and already has more than 200 Argos outlets within its supermarkets, having rapidly expanded over the past year.
It is expected that Argos will now start appearing in Asda’s stores, with Sainsbury’s chief executive Mike Coupe saying that the deal “brings scale in clothing and general merchandise.”
Q Why are the two companies joining forces now?
A All retailers are having to take drastic action to stay competitive during a critical time for the sector. With Amazon eyeing up the UK food market with its Amazon Fresh delivery service, food retailers will be nervous about its sprawling logistics network and buying power.
Sainsbury’s and Asda also have to fend off price competition from Aldi and Lidl. As a value supermarket, Asda has been under significant pressure as the German discounters have grown their market share.
Tesco’s recent merger with wholesaler Booker Group, cleared with minimal fuss by the CMA, will have given executives at Sainsbury’s and Asda confidence about the deal being green-lit.