As the discounters Lidl and Aldi continue to reshape the UK retail landscape,Sainsburys(LSE: SBRY) is trying to fight back by slashing prices.
Unfortunately, in order to cut prices without sacrificing profits, the company is having to cut costs.
And as part of the groups plan to save 500m over the next three years, it has been announced today that the group is planning to cut 800 jobs in its stores. This announcement follows the groups decision to cut 500 head office jobs in January. Management has stated that the job cuts wont affect the customer experience, although the cuts will reduce the number of staff in stores late at night.
Sainsburys management believes that the change to staffing levels wont put customers off the retailer. However, there are some signs that customers are turning their back on the company after it made changes to theway its Nectarcard reward scheme works.
From 11 April, Nectar card users will only receive one point for every 1 spent in stores, compared to the previous scheme of two points for every pound.
Looking at the initial reactions to these changes, a large number of customers have been put off shopping at Sainsburys. Moreover, some shoppers have decided to desert the retailer in favour of the discounters, where they can buy more for less.
Of course, these are only initial reactions and the official figures may show that customers have not decided to desert Sainsburys at all.
Figures from Kantar Worldpanel show thatSainsburys grew its sales by 0.2% in the 12 weeks to March 29. However, the changes to the Nectar card programmedid not come into force until nearly two weeks after these figures were published.
But even if Sainsburys sales growth does continue, the company is likely to issue a wave of bad news over the next 12months. Indeed, Tescos recent set of results, and record-breaking loss,brought to light the many pressures UK retailers are now facing.
For example, just like Tesco, Sainsburys could be forced to write down the value of its supermarkets and take a number of one-off charges brought on by restructuring costs.
So, as Sainsburys tries to cut costs and fight back against the discounters, initial indications show that some customers are planning to turn their back on the retailer. And its becoming clear that Sainsburys management need to come up with some radical new ideas to draw customers back into the companys stores.
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