Sainsbury’s is the United Kingdom’s second-largest supermarket chain. Established in London 150 years ago, the chain is no new name on British streets. However, the supermarket has long fought a tough competition with other brands, such as market-leading Tesco or close competitor Asda.
In such a tough space, it’s essential that Sainsbury’s pay close attention to its immediate business environment and how that might affect internal operations. One way to identify potential factors that might affect Sainsbury’s is by using PESTLE analysis — which reviews the Political, Economic, Sociocultural, Technological, Legal, and Environmental factors affecting a business — and that’s exactly what we’ll do in this article. Yet, feel free to check out our recent Sainsbury’s SWOT analysis for even more insights.
Here are the Political factors affecting Sainsbury’s:
In 2016, the United Kingdom voted to leave the European Union. This move, dubbed “Brexit”, is yet to take place; however, it could have serious consequences for Sainsbury’s, among other English supermarket chains. Leaving the European Union could make it much more difficult for supermarkets to affordably import products from abroad. While an increase in the cost of foreign products would likely be passed onto the end consumer, this move means Sainsbury’s will have to push hard to ensure customers continue spending as much as possible, in order to maximize profits.
Here are the Economic factors affecting Sainsbury’s:
Rising fuel costs
Over the last few years, fuel prices (for both diesel and petrol) have risen slowly but surely. A diminishing supply of fossil fuels and the possibility of an environmentally-minded fuel tax could cause the prices of fuel to rise more significantly. Ultimately, high fuel prices make it more expensive to transport goods into and around the country. Supermarkets like Sainsbury’s will have to account for these increased costs. This may manifest in the form of lower profit margins or higher price tags for the consumer; in either case, this is likely to decrease overall profitability.
Another Economic concern for Sainsbury’s is that of rising salary expectations. Like most supermarkets, Sainsbury’s employs a large number of workers to perform simple tasks such as stocking shelves or manning the checkout. If Sainsbury’s is expected to pay these employees more than ever before, this will seriously increase their expenses, thus reducing overall profit. As mentioned previously, this may be counteracted by an increase in the end price of products, but this would be likely to decrease sales volumes (and thus profitability, indirectly).
Sainsbury’s is up against fierce competition. The United Kingdom has a number of popular supermarket chains, including Tesco, Morisons, Waitrose, Lidl, Aldi, Asda, and others. What’s more, the country also has a large number of independent corner stores and other, more specialist food stores such as butchers and bakeries. This competition shows no signs of subsiding, and forces Sainsbury’s to constantly innovate while minimizing their ability to make unreasonably high profits.
Here are the Sociocultural factors affecting Sainsbury’s:
The 21st century has shown a clear Sociocultural trend towards healthy eating. Unhealthy “junk” food is no longer in fashion, while body-conscious salads, shakes, and snacks are taking over. This trend towards making healthier dietary changes is an extremely important one to track for supermarket chains like Sainsbury’s, since adapting to consumers’ demands is absolutely imperative to long term success.
Consumers are also increasingly conscious of where their food has come from, hence the fairtrade movement. This social initiative involves paying extra for food and drink so that farmers can be guaranteed a fairer price for their produce. The fairtrade movement is particularly popular in the context of both coffee and chocolate, but has a widespread reach that affects products on all aisles!
Here are the Technological factors affecting Sainsbury’s:
Technological advancements in analytics, such as the use of Big Data and Artificial Intelligence principles, are allowing companies around the world to learn more about their operations. In the case of supermarkets such as Sainsbury’s, advancements in analytics might be used to build highly accurate models that describe how much of a given product is expected to sell (preventing waste) and at what price (maximizing profits). The development and implementation of these techniques are sure to improve the profitability of Sainsbury’s.
Like most other UK supermarkets, Sainsbury’s offers online shopping options. More so than ever, customers want to order their groceries from the comfort of home. The advent of eCommerce and its usage in the food industry are still in early days; it will be interesting to see how supermarkets get the most out of this growing technology.
We couldn’t find any Legal factors affecting Sainsbury’s.
Here are the Environmental factors affecting Sainsbury’s:
Supermarket chains are responsible for a large carbon footprint. Whether it’s transporting goods from one side of the country to the other or keeping huge supermarkets and warehouses lit up around the clock, Sainsbury’s surely creates its fair share of carbon dioxide. As environmental concerns mount, companies around the world will be expected to reduce their carbon footprint. Sainsbury’s will need to identify new ways to become more environmentally-friendly and seriously consider how they can minimize the ecological damage caused by their operations.
In addition to creating a large carbon footprint, you can be sure that supermarket chains such as Sainsbury’s pay a great contribution to the plastic waste crisis. By packing produce into single-use plastics, supermarkets introduce more Environmental strain than they can handle. Sainsbury’s will need to look for ways to tackle plastic waste, such as offering incentives to customers who buy foodstuffs loose and bring their own containers and bags.
PESTLE Analysis of Sainsbury’s: Final Thoughts
Sainsbury’s in no small fish among United Kingdom supermarkets. However, the brand has to deal with fierce competition, political uncertainty, rising fuel costs and salaries, as well as high consumer expectations for healthy eating options, supplier welfare, and environmental awareness. On the plus side, Sainsbury’s has a number of ways to distinguish itself from other chains, and will be able to do so with the help of advanced analytics.
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