Sainsbury’s to ‘rebalance’ investment towards IT and digital

Sainsbury’s has outlined plans to invest more in IT and digital than on new supermarkets, as it reported a fall in sales and profit in its latest results.

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Sainsbury’s has outlined plans to invest more in IT and digital than on new supermarkets, as it reported a fall in sales and profit in its latest results.

It aims to cut its capital expenditure budget by £1.2 billion, from £2.8 billion spent between 2012/13 and 2014/15 to £1.6 billion over the next three years.

“Our spend will be rebalanced towards digital and technology and service-focused investments,” the company said in its interim results.

According to a graph in Sainsbury’s results presentation, the supermarket has been spending gradually more on IT between 2012 and 2014. It expects this to continue increasing to a peak in 2016, before starting to fall again to pre-2014 levels in 2017 and 2018.

In contrast, spend on new supermarkets shows a declining trend between 2012 and 2018.

“Our strategy is evolving to address the continuing shifts in customer shopping patterns which we believe will lead to a greater emphasis on product quality and ease of shopping, and an increase in multi-channel shopping,” said Sainsbury’s CEO Mike Coupe.

“We have good foundations for future growth in our supermarket and convenience estates, our online and non-food businesses and in Sainsbury’s Bank. However, we need to make sure that we are investing in the right areas and by reducing our costs and capital expenditure we are ensuring that we have the resources to enable us to do so.”

Technology investments

Sainsbury’s said that it will continue to invest in its online groceries business to “further improve” its website and customer experience. It is also trialling new ways for customer to order and receive their groceries, including click and collect.

“We know for our customers, if they shop with us in our shops and they become an online shopper, they will buy more stuff overall,” Coupe told analysts.

“So one plus one doesn’t just equal two, it equals two-and-a-half to three. It’s very important that we address our online offer to our customers.”

Other areas of investment include in providing new technologies, such as the reintroduction of ‘CAM’, an automated availability tracking tool which reduces cost and improves on-shelf availability throughout the day, according to the supermarket.

Sainsbury’s will also invest in its systems infrastructure to join its data sources together to create a single view of its customers, and is installing a new EPOS system - which is currently on trial in five or six stores - across its stores over the next year. Further, it is thinking about rolling out online clothing following “positive” early results of a trial that has been running over the past nine to 12 months.

“By providing [customers] with a single sign-on and access to their own personal shopping list, they can start to think about how they might buy their products differently in the future in the various parts of our business,” Coupe said of the plan to create a single view of customers.

“We believe this technology is very powerful and we believe over time this will allow us to compete even more with our competitors in the market overall. Because we have this data, it’s unique to us. The power of joining it together and helping our customers in the future is one of the key differentiators as we look forward - not today, but maybe over the next two or three years, we’ll start to see developments in this area.”

Another technology the supermarket is currently trialling is its in store shopping app, which allows customers to scan products as they go around a store, and pay more quickly at dedicated tills.

In the 28 weeks to 27 September 2014, Sainsbury’s said that its underlying pre-tax profit was £375 million, down six percent on the same period last year.

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