Sainsbury’s online business is still growing, but the rate has slowed significantly since 2012, according to the retailer’s latest trading update.
The supermarket, Britain’s second largest after Tesco, revealed that its online business grew by about seven percent during its second quarter - the 16 weeks to 27 September 2014.
However, an analyst at Redburn Partners, James Tracey, pointed out “a big, long slowdown over the years” in the supermarket’s call with analysts. Online growth was 10 percent in the previous quarter, and even higher in 2012/13 at 20 percent.
Despite the declining trend, Sainsbury’s chief executive Mike Coupe responded that the company believes the online groceries market will continue to grow.
“Our view of the world is that [the online] business will continue to grow, the market will continue to grow, probably not at the same rates as it’s growing at the moment, you will see some level of saturation over time. But for the next period of time, for the next five years, all of the market data would suggest that online will become a bigger and bigger part of our overall business and the overall market,” he said.
Sainsbury’s said that the seven percent growth had been affected by a “high level of competitor customer acquisition activity in the quarter”. However, it said it did not want to focus on such “short-term” activity.
“On online growth, we won’t get involved in buying business for the sake of buying business. We want to build a sustainable online operation which is focused on delivering great service to our customers,” Coupe said.
He added: “We look to invest in things that make a return and in a world where people are spending money that’s not making a return for them just to drive top line sales, that doesn’t make commercial sense to us.”
In comparison, Sainsbury’s convenience business - it’s Local stores - reached annualised sales of £2 billion and grew at around 17 percent.
“The reality is there’s a huge amount of promiscuity in the online sector with customers shopping across one offer or t’other [sic],” John Rogers, Sainsbury’s chief financial officer (CFO) said.
“And in a way what we want to do is to build an online business that’s fit for purpose but for our customers, and therefore we’ve decided not to participate in what we see to be unprofitable customer acquisition activity evident in the market today.”
The slowed online growth contributed to a 2.8 percent fall in Sainsbury’s like-for-like retail sales in the period.
Earlier this year, Sainsbury’s said it hoped to double its annual sales figures online to £2 billion after launching a new multichannel grocery website based on IBM’s WebSphere ecommerce platform.
The new site is meant to provide better user experience across different channels, including on mobile devices.
At the time, Jon Rudoe, digital and technology director at Sainsbury’s, said: “It’s taken Sainsbury’s 14 years to reach £1 billion annual sales online and this new platform gives us the capacity to double this.”