Sainsbury’s-ASDA merger would create a general merchandise powerhouse

Sainsbury’s proposed merger with ASDA, if accomplished, would create a general merchandise arm that would leapfrog current market leader Dunelm. The group would also include Argos and Habitat, which Sainsbury’s acquired in 2016.

If the competition and markets authority authorises the merger, Sainsbury’s group will overtake Dunelm to become the UK’s largest homewares retailer. Image: Sainsbury’s

If the competition and markets authority authorises the merger – the watchdog is investigating overlap within the supply of groceries, fuel and homewares – Sainsbury’s group will overtake Dunelm to become the UK’s largest homewares retailer; the group will take a 9.7% share of the market versus Dunelm’s 8.1%, according to data published in GlobalData’s homewares sector report 2018.

Benefitting from economies of scale, Sainsbury’s group would be able to offer lower prices helping it match product pricing at value merchandisers such as B&M and The Range – and potentially giving Sainsbury’s group a competitive advantage over these harder-to-reach retailers. Other grocers, mid-market players such as Marks & Spencer and Next and higher-priced homewares specialists such as Dunelm and John Lewis would also suffer.

The new conglomerate would likely generate greater sales from Argos post-merger, further elevating its homewares share, with concessions opening within Asda stores. This would be a sensible move given the customer crossover between Asda and Argos in homewares is greater than Sainsbury’s and Argos (25.4% versus 14.9% according to GlobalData research). Argos will also benefit from offering a broader product range, including Sainsbury’s home, ASDA George and Habitat.

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