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Asda-Sainsbury’s merger – what’s the one thing Amazon can’t do?

Somewhere, in a sweaty conference room, a dozen supermarket suits are trying to plot the path of least resistance from Point A (Asda here, Sainsbury’s there) to Point B (a two-headed retail monster). But what I’m interested in is their Point C.

At first glance, this $15bn supermerger seemed incomprehensible. Integrating two management structures, two back offices, and several labyrinthine supply chains? It sounds like an operational no-go.

On the face of it, reconstituting the architecture of two long-established brands (and sub-brands) while balancing the pair’s dissonant customer profiles is a strategic nightmare. Then there’s the inevitable store closures in the name of competition.

Gargantuan struggles await. There’s a reason deals this size come but once a decade.

Yet the Competitions and Markets Authority (CMA) seems willing to give the merger a fair hearing. Conceptually at least, they haven’t shot it down. Should the CMA build a realistic algorithm to determine what like-for-like competition truly means in 2018 (factoring in digital threats and properly weighting the clout of Lidl and Aldi) then we could see a green light.

It’s ironic that Amazon could, in a small way, be a factor in facilitating the merger. Because remember that sweaty board room? There’s a big old elephant in the middle of it, and Bezos be thy name.

Some commentators have gone as far as to describe the Asda-Sainsbury’s marriage merely as “insulation” before Amazon moves deeper into the food game. With Amazon’s Whole Foods acquisition, and inroads made via initiatives like Pantry and Prime with Morrisons, food retailers the world over have reason to be nervous.

And none more so than Walmart. Amazon now outvalues Asda’s parent co three to one. It’s not quite Hail Mary time, but stay tuned. In response, Walmart is bolstering its digital ecosystem with a smartphone shopping app, automated parcel pick up machines, and smoother logistics to drive down delivery times. Basically, Walmart wants an infrastructure that rivals Amazon’s.

Similarly, Sainsbury’s boss Mike “we’re in the money” Coupe saw his 2016 acquisition of Argos, at least in part, as a means of luring impulse buyers back into bricks and mortar stores, and bringing more brand-name options to the shopping experience.

Individually, both companies recognise that they want/ need to evolve, yet the merger has to be more than safety in numbers. It has to be about more than a 10% price drop on essentials, or having more products and purchase power.

Back in that sweaty board room. Point A is where we are now. Point B is making this thing, somehow, work. I wonder if Point C is about giving consumers something Amazon can’t.

Think of the sub-brands at play here. Argos, Nectar, Habitat, Tu, George. Both retailers sell electronics, both have homeware. There’s financial services. There’s pharmacy, stationary, media, toys, gifting, luxury, gardening …

For one, we have the ingredients for another digital megastore capable of challenging, if only a little, Amazon’s stranglehold. If all that’s missing is the tech and logistics, please see previous par about Walmart’s new digital vision.

It’s a nice thought that two UK institutions might be able to harness the best of both brands to siphon off some of Amazon’s core business. Then again, this would amount to less of an assault and more of a tickling.

But a sensory shopping experience in hundreds of air-hanger superstores up and down the UK? That’s interesting …

Both brands have a lot of equity. They’re institutions. That fact makes the merger complex from a brand assimilation point of view, but it also means that both supermarkets have a lot of good will in the bank.

By leveraging that kudos, Asda and Sainbury’s have an opportunity to position themselves for a new era: to put their best to work and ask the great UK public to trust them as they reconfigure the big shop for a new day.

Between the two of them, Asda and Sainsbury’s have the mega stores and the national footprint. Post-merger, the product inventory will be absolute. By creating destination shopping experiences, the duo could more than dent Amazon’s monopoly by pushing us back to bricks and mortar retail by offering something, at scale, that’s tangible and new.

Imagine in-store demonstrations, cooking tutorials, tech showcases. Santa visits. Workshops, lectures, health screenings, film screenings, financial clinics. Imagine two UK stalwarts leading the charge: using their space, reach and inventory to curate family days out; gifting into the neighbourhood as part of a new value exchange. I’m never done reading about how experiential will attract the millennials and salvage the high street.

This week’s Marks and Spencer announcement that they’ll close 100 stores over five years may present a similar opportunity. Instead of systematically culling unsustainable premises and people, what if the organisation were to trial something new – and bequeath a new experiential retail concept fit for the future and a generation that’s been long slipping out of reach.

If thousands of square feet are to be punted in the name of survival, where’s the harm in a near-death experiment?

It’s a nice thought, ruminating on how UK institutions can disrupt the dial: shift the paradigm to bring the customer something they can breathe in and feel. Something Amazon can’t*. I know a lot of young agencies that’d relish the challenge of bringing a new deal to life.

Pipe dream? Perhaps. But if the brightest minds in Sainsbury’s and Asda are locked in a room to roadmap a merger that’s beset on all sides with difficulty, what’s another stretch goal between friends?

*Yet.

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