Sainsbury Shoppers in U.K. Purchase Fewer Items as Inflation Saps Spending
J Sainsbury Plc (SBRY) customers are buying fewer items and shopping more frequently as rising inflation saps their spending power, according to John Rogers, chief financial officer of the third-largest U.K. grocery chain.
“The key trend has been customers buying one less item on average per basket, and this is true across all customer segments, single people, families,” Rogers said in an interview in London. “They’re managing more carefully what they buy.”
Britons are seeing their finances squeezed at the fastest pace since the 1970s as inflation outpaces wage growth and the government implements budget cuts and an increased sales tax. To tempt customers to spend more, Sainsbury is offering discounts such as a reduction of 10 pence (16 cents) per liter on fuel when shoppers spend 60 pounds or more in its stores.
Shoppers may be seeking to overcome inflation by buying fewer items, rather than spending more to get the same number. Prices at the London-based retailer are 3.5 percent higher than a year ago, compared with 3 percent in the first quarter.
“Headline food inflation is about 4.5 percent to 5 percent, but once you reflect customers switching into buying different, cheaper products, the net inflation is more like 3.5 percent,” the executive said.
Consumers are also wasting less produce and making more frequent visits to stores so that they only buy what they need.
Sainsbury’s convenience stores, which account for 3 percent of the market, are a growth opportunity, Rogers said. The retailer is opening two outlets a week, and adding new 30,000 square-foot (2,787 square-meter) stores in areas where it lacks a strong presence. It’s also extending some existing stores to add more non-food items such as its Tu home and clothing range.
Sainsbury’s Basics range of own-label products, the cheapest of its three own-brand offers, is recording the fastest growth, according to Rogers, who was promoted to chief financial officer last year from property director.
The retailer is targeting holders of its Nectar loyalty card with offers such as money off beer and wine when they purchase single-portion ready-meals, Rogers said.
“The tough economic climate will continue for another 12 months if not longer,” he said. “There’s no question the next 12 months will be challenging.”
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