After 4 years, the Danish retailer Netto, with the not so famous strap lines ‘Home of Smart shopping’ and ‘Discount with Bite’, is doing things differently.
Ditching the stigma attached to its cheap cheerfulness and respectfully acquiring £778mn from the sale of 200 outlets to Asda, Netto’s partnership with the UK’s third biggest food retailer hopes to banish the myths and put it back amongst the food market’s major players.
Sainsbury’s has teamed up with Denmark’s biggest retailer Dansk Supermarked to open 5 Netto stores in the next 2 months. The first store opened last week at Moor Allerton in Leeds, and a further 4 are planned for Sheffield, Ormskirk, Doncaster and Manchester in the next few weeks.
Sainsbury’s chief executive Mike Coupe says the merger will bring “some much needed Scandinavian flair to the UK discount market.”
The joint venture has seen both Sainsbury’s and Dansk investing £12.5mn to bring back the once flagging discount chain, with its bright black and yellow signature. It even has a new hashtag #hellonetto for exposure on social media sites.
The unique 50/50 proposition, will give Sainsbury’s a chance to improve its market shares against its major competitors Tesco, Morrisons and Asda, but also gain exposure to the high-growth discount market for the first time against strong rivals Aldi and Lidl, with a ready made brand.
Chief executive of Netto parent company Dansk Supermarked said: “No one knows British customers better than Sainsbury’s and nobody knows discounting better than Netto.
“Discount retailing has come of age in the UK and the market can support so many more discount shops. Our competitors Aldi and Lidl have done a great job in helping discount become more mainstream-but we will take the concept one step forward.”
Sainsbury’s and Danks are expected to incur losses of £5-10mn which for Sainsbury’s is a relatively low risk but still may prove difficult.
But the fledging war in discount shopping means a middle market grocer like Sainsbury’s, whose own customers are happy to pay a little more for their quality, have a better advantage against the increased competition from discount retailers. Especially after it recently reported a 1.1% fall in sales- their first for 9 years.
Non-the-less, the exciting news will have positive implications for Sainsbury’s if it goes well. The improvements in its long term growth will expand their conveniences, online and non-food businesses, from the benefit of having the discounter experiences of Netto to run an effective chain of competitive stores.
Sainsbury’s CEO Mike Coupe said: “We’re delighted to say velkommen to our joint venture with Dansk, which brings some much needed Scandinavian flair to the UK discount market. We’ll ofcorse be following this trial closely and supporting Netto’s discounter expertise with Sainsbury’s unique understanding of the UK customer.”
The discount food sector is worth close to £10bn a year and is expected to double in 5 years to £20bn.
Netto already has 1,300 stores across Denmark, Sweden, Poland and Germany and 15 scheduled for the UK by summer 2015. A further 4 will be open before the end of the year selling 2,000 products with new ranges specially created for UK stores with popular in-house bakeries.
It’s a brighter outlook for the store that once stood alongside Aldi and Lidl before disappearing in 2010, but its new strategy hopes to propel it well-ahead into the budget food market hemisphere.