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This month has seen the Netto and Sainsbury’s partnership launch with their first store opening in Leeds. Netto, founded in Copenhagen, Denmark, is a discount retailer operating in several European countries and is looking to re-enter to UK market.
The History of Netto in the UK
Originally, Netto was in the UK from 1990 to 2011. In May 2010 Netto announced that it would sell its UK stores to ASDA for £778M. 2011 saw the rebranding of 147 former UK Netto stores to Asda complete, increasing Asda's smaller store portfolio. However, under the Competition commission requirements, Asda distributed 27 of the stores to Morrison's and 20 stores to the Haldanes group, which went into administration in 2012 after their venture failed.
20th June 2014- It was reported in June that Sainsbury’s has entered into a joint venture with Netto that will see the launch of 15 Netto stores by the end of 2015. Both Netto and Sainsbury's will invest £12.5m in the venture, with the first store due to open later in 2014.
26th June 2014- Netto appointed Tom Hampson as its UK marketing director ready for their re-launch in the UK. The new Marketing Director’s job will help the discount retailing tie up between Sainsbury’s and Netto. Tom Hampson originally worked for Sainsbury’s over an eight year period.
30th June 2014- It was reported that Netto had pinpointed where it wanted to open 15 trial stores for its UK launch in late 2014. Netto planned to target an area of the North of England roughly 120 miles in diameter radiating from Leeds and stretching west to east from Liverpool to Hull, and north to south from Richmond in North Yorkshire to just north of Nottingham.
6th November 2014- Sainsbury's and Netto opened the first of 15 stores with Netto in Moor Allerton in Leeds. If successful, the next stage of the joint venture will see the new format rolled out across the country.
Does the UK need anymore discount retailers?
The UK supermarkets’ war has been a long one which isn’t showing any sign of letting up. Recent discount retailer entrants, Aldi and Lidl, have made a big impression on UK consumers. Despite the growing confidence in the UK economy, consumers are realising that they can still get quality products for lower prices, regardless of their shopping budgets, saving money on daily essentials to be able to spend elsewhere.
It’s a significant trend that retailers are going to have to watch for, especially as we move into 2015. Consumers are becoming ever-more savvy in finding the best deals with the internet at their disposal, and because they’ve had to do it through the tough economical times, it’s become second nature to search out the best quality for the lowest price.
Per Bank, chief executive of Netto’s owner Dansk Supermarked, commented, “At that time [2010] the thinking was that discount was only for those on low incomes. Now it is for everyone. Everybody wants value for money”. The brand certainly believes there is room for them in the rapidly growing discount market, as do Sainsbury’s, and this relationship could prove extremely successful on both sides. Netto benefits from Sainsbury’s understanding of the UK market and what customers here want, while Sainsbury’s gains a potentially significant slice of the discounting market.
Netto’s affiliation with Sainsbury’s was a wise choice and can stand them in good stead, especially given that they are the only one of the four big retailers not currently in the media and critics’ firing line. However, Netto will have to be creative in competing with Lidl and Aldi, the up and coming names in the UK’s supermarket sector, as well as those well-loved and well-established at the top of the food chain, Waitrose and M&S. Netto’s choice to enter the UK market comes at a very interesting time, with competition in this market currently extremely tight, and the brand will need to make a stand out impression to set it apart.
And what will this mean for the rest of the players on the UK’s grocery scene? Those focusing on their offering rather than competing seriously on price are likely to remain unaffected: the likes of M&S and Waitrose at the top end of the market have a clear strategy and offering focusing on their customers and quality produce, rather than low prices, which is so far proving successful. It is the retailers stuck in the middle of the market who will suffer, Asda, Tesco and Morrisons, who are losing out to those at the top on quality and to those at the bottom on price. One more discounter in the mix can only be bad news for them.
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