What does Sainsbury’s new Argos offer mean for eBay?

You probably noticed in the news yesterday that Sainsbury’s have come back with a second offer to acquire Argos, or more correctly it’s parent the Home Retail Group.

This time the total offer in cash and shares amounts to £1.3 billion and the deal looks likely to go through. Argos have said “Whilst the Board of Home Retail Group continues to believe in the prospects for the standalone Company, it recognises that the Possible Offer will provide an attractive opportunity for Home Retail Group shareholders

Argos added “The Board of Home Retail Group has indicated to Sainsbury’s that it is willing to recommend the key financial terms of the Possible Offer to Home Retail Group shareholders“, subject of course to due diligence and other terms being agreed.

We’ll leave the financial press to pull the deal apart and figure out whether it’s good, bad or indifferent for two companies each with their own performance problems to throw their lot in together. What we want to know is if it’s good for eBay?

eBay to lose 25% of Fulfilment Network

Sainsbury’s have identified between 150 and 200 Argos stores that could be closed and moved inside a nearby Sainsbury’s as a concession. Out of the total 800+ Argos stores that’s a loss of around a quarter of eBay’s Click and Collect and Click and Drop fulfilment network.

The Home Retail Group have already sold Homebase separately and while we understand very few Homebase stores were part of eBay’s Click and Collect network, they represented an easy future expansion to a possible 265 additional locations.

eBay Click and Collect at Sainsbury’s?

Sainsbury’s have over 1,200 stores in the UK. I would imagine it would be attractive for Sainsbury’s to have eBay customers frequenting their stores whenever they made a click and collect purchase. We know that as of October 2015 over 3 million eBay parcels had been collected from Argos stores, so the number is probably now approaching the 5 million mark.

Sainsbury’s are probably also attractive to eBay, with 700 or so of their locations being convenience stores they will be relatively close to consumers houses and open long hours. The only question is do the have the space to store parcels in the same way that Argos do and how much would it cost to roll out the scanning technology to each Sainsbury’s store to facilitate parcel management.

Sainsbury’s is a very different operation to Argos as they’re not primarily set up in the warehouse with a trade counter format. That’s what made Argos such as attractive partner to eBay.

So what could happen to eBay’s Click and Collect at Argos?

Option 1- Disaster, but unlikely

Lose 200 Argos stores plus Homebase and eBay’s Click and Collect program shrinks rapidly.

Option 2 – Probable and likely

eBay will perhaps lose very few stores overall if the Argos concessions inside Sainsbury replace the 200 stores that close (we know you can already collect from existing Argos/Sainsbury’s locations).

Option 3 – Possible and very attractive

Long term, eBay get access to up to 1,200 new locations through a deal with all Sainsbury’s stores. There are certainly technical and practical considerations, but Sainsbury’s would certainly welcome the footfall in their stores.