American consumers have the luxury of choosing a single retailer like Amazon for just about all of their purchasing needs, whether they’re in need of home furnishing, high-end electronics or even fresh groceries. Now, it looks like the U.K. might be on a similar path thanks to another brand.
The Telegraph reported that Sainsbury’s, the U.K.’s second-largest supermarket chain, is close to finalizing a takeover agreement with Home Retail Group, the parent company of catalog brand Argos. Worth an estimated $1.9 billion, the deal would see Sainsbury’s take on Argos’ widespread distribution network and existing inventory. The two sides are under something of a time crunch — the deadline for the deal comes today (Feb. 2).
If that takeover plan is going to pan out, Sainsbury’s will have to attempt some unorthodox measures to sufficiently handle the incoming volume of Argos’ business. The grocery retailer has identified at least 150 to 200 stores out of Argos’ total 734 U.K. locations that it plans on folding into nearby Sainsbury’s storefronts, BBC reported. The two companies ran a similar pilot program several months ago to great success, and if Sainsbury’s is hoping to navigate this Argos takeover with as few interruptions as possible, mitigating excess work during the transition is going to be critical.
However, changing the physical makeup of Argos stores could have an unintended effect on longtime customers of the brand that don’t quite mesh with the philosophy of the new management.
“We can certainly foresee the closure of high street Argos stores,” Clive Black, an analyst at Shore Capital, told The Telegraph. “Less clear is whether or not high street Argos customers will simply get into their cars and drive to a Sainsbury’s supermarket for the Argos proposition. Such an imponderable item is central to the cost savings that must be factored into this deal’s mathematics.”