Sainsbury’s winning Argos bid sets up an Amazon rival

Argos NewburySainsbury’s are set to become Amazon’s biggest UK competitor with the acquisition of Argos looking almost certain to go ahead.

Hours before Friday’s deadline, rival bidder Steinhoff indicated that they’d lost interest (and instead outbid FNAC for French white goods retailer Darty). That left the field clear for Sainsbury’s to make their original intended offer – a £1.4billion bid (up from their previous £1.3billion due to a rise in Sainsbury’s share price).

It’s not a hostile takeover bid either – Sainsbury’s are already friendly with Argos hosting Argos concessions in some of their supermarket stores. The board of Argos said “The Board of Home Retail Group also notes Sainsbury’s views on the strategic opportunites and synergies available through a combination of the businesses and Sainsbury’s recognition of the talent in both our management and our colleagues. Sainsbury’s has stated its wish to obtain the recommendation of the Board of Home Retail Group for its offer, and the Board of Home Retail Group looks forward to working with Sainsbury’s towards such recommendation“.

This will leave Sainsbury’s amply able to compete with Amazon in the one place that Amazon traditionally always wins – delivery. Amazon have consistently raised the delivery service bar to next day and then same day or even delivery within the hour. However their same day/one hour delivery (Amazon Now) is only available in a very few urban inner city areas. Argos have same day delivery capability across most of the country through their hub and spoke network of some 700 odd stores.

Amazon have also ramped up their Amazon Pantry efforts signing a deal with Morrisons to supply own brand products. Here again Sainsbury’s are well positioned to compete.

Finally Amazon’s inhouse click and collect network is limited to a number of third party sites including Amazon Lockers and Pass my Parcel service. In contrast Argos have click and collect at all their stores with a 60 second Fast Track service available for collections. They also handle Click and Collect for Amazon’s arch rival eBay.

If Sainsbury’s extend Click and Collect to all their supermarkets including Sainsbury’s Local stores, then this will add some 1,200 locations for local Argos collection, as well as timed same day Argos home delivery. If eBay can piggy back on this it’ll also increase the attraction of their Click and Collect service.

Amazon are going to have to stretch to match the joint capability of a combined Argos and Sainsbury’s as will other high street retailers such as John Lewis. Will they catch up, can they catch up? The next move is down to Amazon.