Sainsbury's ups supermarket stakes with 2,000 job cut strategy

25 October 2017 Consultancy.uk

As part of a £500 million cost-cutting plan, supermarket giant Sainsbury’s has announced that it will give 2,000 staff their marching orders. The savings scheme, which is being advised upon by consultants from McKinsey & Company, was previously expected to sever 1,000 employees, but will now be double that figure, as discounters Lidl and Aldi continue to put pressure on the UK’s Big Four grocers.

The UK’s second-largest supermarket chain has confirmed the shedding of 2,000 employees over the coming year. Following an initial draft proposal in August, which suggested as many as 1,000 staff were in line for the axe, Sainsbury’s have unveiled plans to offload twice as many workers from both stores and back-room operations, in order to bolster profits amid falling sales figures. The grocers, who are a household name in British retail, had previously brought in management consulting firm McKinsey & Company, in order to draw up a headcount reduction plan amid ailing sales figures.

Having inched into 0.1% growth at the end of last year’s Q4 – the first time the store’s figures had increased in over two years – Sainsbury’s sales fell back into decline after it posted a 0.8% decrease in like-for-like sales for the first quarter of 2017. Market analysts have suggested sales were hit by the abolition of the store's "buy one get one free" offers, along with its brand-match guarantee. While ending those sales enabled the reduction of prices overall, a damning report by the competition regulator said multi-buy deals across the industry routinely mislead customers, further impacting on the reputation and sales figures of top stores.

Sainsbury's ups supermarket stakes with 2,000 job cut strategy

The big four supermarket chains of Tesco, Sainsbury’s, ASDA and Morrisons have been embroiled in an increasingly fierce price war as German discounters Aldi and Lidl – who are also investing heavily in the US – expand across the UK, with Aldi becoming the fifth largest chain in the country, while Lidl is projected by Kantar Research to be on course to reach the top seven by the end of 2017. As a result, each of the biggest supermarket chains have announced job cuts in recent years as they seek to compete with the fast-growing discounters.

Sainsbury’s chief competitors, Tesco, rapidly scaled back staffing costs, cutting 1,400 jobs in June. Meanwhile, ASDA, who implemented a project renewal plan – devised with support from consulting firm Bain & Company in 2015 – came in for stringent criticism for their own attempts to avoid falls in profit. In a report published a year after the initial ruling, British supermarket watchdog, the Groceries Code Adjudicator (GCA), condemned the company, finding that ASDA had demanded up-front payments in order for suppliers to retain their place on the shelf, which in some cases were worth a quarter of suppliers’ annual sales value.

Now, in view of this fiercely competitive market, a spokesman confirmed that the store is consulting on measures that would lead to a loss of 1,400 jobs, by removing all in-store human resource and payroll clerk roles. Sainsbury’s currently employ 3,000 back-office staff across the UK, and some 600 further job losses will meanwhile be sourced from a restructuring behind the scenes, in order to consolidate human resource and other support roles. The changes to HR mean tasks like processing payroll will no longer be done in store. The 600 head office staff affected are based in Manchester, Coventry, Edinburgh and London.

The figures come in stark contrast to previous estimates released by the company. In March, the company had revealed it was cutting 400 jobs in a restructuring of its store operations – which also included the changing of working hours for 4,000 more employees and the scrapping of night-shifts – while the figure for redundancies rose to 1,000 by August. The new target of 2,000 lay-offs is just part of a broader strategic plan drawn up by McKinsey with Sainsbury’s, aimed at finding £500 million savings.

“Following a comprehensive review, we are proposing some updates to our HR structures and systems, as well as changes to a number of other support roles, subject to consultation,” Sainsbury’s said, in a release. “This has been a difficult decision and we appreciate that this will be a tough time for those colleagues affected by the changes.”

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