Sainsbury’s to rival Amazon post-Argos purchase
Battle lines are being drawn in a potential new price war in online shopping in Britain. Supermarket giant, Sainsbury's, and leading online retail heavyweight, Amazon, are set to compete in the lucrative online shopping market, with Sainsbury's planning to reinvent itself through the £1.4bn purchase of Argos. The supermarket will be able to offer customers more than 50k products on a four-hour click-and-collect service or same day delivery. Sainsbury's and Argos' combined sales of around £30bn for 2015 far exceeded Amazon UK’s £6.31bn, however, Amazon has also recently hired a former Asda executive as its new UK chief and reportedly plans to launch its own fresh food home delivery services via its partnership with Morrisons. 

Sainsbury's and Amazon are to go head-to-head in a battle that will transform Britain's shopping culture and trigger a new price war.

The supermarket is re-inventing itself with the £1.4billion purchase of Argos, which will allow shoppers to click and collect more than 50,000 products within four hours.

There will also be a same-day delivery service of thousands of products from a combined business that will dwarf the UK sales of Amazon.

Amazon has already planned its retaliation with the appointment of a former Asda executive as its new British chief and the imminent launch of its own fresh food home delivery service.

Sainsbury's is re-inventing itself with the £1.4billion purchase of Argos, which will allow shoppers to click and collect more than 50,000 products within four hours - sparking a battle and price war with Amazon (file picture)

The move is predicted to trigger a titanic price war, delivering further savings to families in terms of putting meals on the table.

The developments will accelerate changes in British shopping culture towards buying through smartphones and computers rather than on the high street.

They also raise questions as to how the likes of Tesco and Asda, which already have substantial online shopping services, will respond.

A study by retail analysts Mintel reported online grocery sales were £8.6billion last year. And it is predicting they will soar 73per cent to reach £15billion by 2020.

The management at Sainsbury's are trying to future-proof the company by tackling the threat posed by the budget chains, Aldi and Lidl, on one side and Amazon on the other.

However, City analysts say the diversification and huge costs involved represent an enormous gamble.

Yesterday, Sainsbury's revealed that sales in 2015 were down by £290million compared to the year before at £25.8billion. As a result, underlying profits fell by 13.8per cent to £587m.

The falls were largely driven by the impact of the discounters, which have forced the company to cut prices by an average of 4per cent over the past two years.

Bosses at Sainsbury's have taken the view that this slow decline is likely to continue unless they take drastic action.

Chief executive Mike Coupe explained the strategy, saying: 'The market is changing very rapidly, our customers have more choices than they have ever had. The use of technology is becoming more important in the retail sector.

'By acquiring Argos we will provide our customers with the ability to buy well over 50,000 products, collect them in any one of 2,000 outlets, whether that is Argos or Sainsbury's stores, within four hours. We think that is pretty compelling in the overall scheme of things.

'We think it would be pretty compelling and unique in the world when we have rolled out and executed what we are planning.

Online retail giant Amazon has already planned its retaliation with the appointment of a former Asda executive as its new British chief and the imminent launch of its own fresh food home delivery service (file picture)

'The ability to click and collect in over 2,000 locations that are convenient to you, on your doorstep, or indeed have it delivered to home across a wide portfolio of products will be quite compelling.'

The company is also working on improving 3,000 of its own-label products to maintain its reputation on food quality.

Sainsbury's has already made significant strides away from being a simple grocer. The company's clothing lines, including Tu, have proved popular with sales up 8.5per cent in 2015.

The company said 70per cent of these purchases are made online and then collected in stores.

Sainsbury's also has a growing financial arm and bank, with plans to start offering mortgages.

It opened 69 'Local' stores during the year and sales through its convenience stores were up nine per cent during the year to over £2.3 billion.

The combined sales of Sainsbury's and Argos are around £30billion, which dwarfs the UK figure for Amazon in 2015 of £6.31billion. The take-over is currently going through an approvals process by the competition authorities.

Amazon has ambitious expansion plans under its new boss, Doug Gurr, who has returned to Britain after overseeing the company's business in China.

The internet retailer is planning to create over 2,500 new permanent jobs this year, bringing the UK total to more than 14,500.

It launched Amazon Pantry, which offers big brands including Colgate, Kellogg's and Ariel, in November last year.

The prices are generally lower than in the supermarkets. However, customers do need to subscribe to its Prime service, which costs £79 a year.

It also has a partnership with Morrisons where the supermarket will sell its fresh produce through the Amazon site starting later this month.