Why Sainsbury Closed Down Netto Stores? An Analysis

Running head: WHY SAINSBURY CLOSED DOWN NETTO STORES? AN ANALYSIS.
WHY SAINSBURY CLOSED DOWN NETTO STORES? AN ANALYSIS
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1WHY SAINSBURY CLOSED DOWN NETTO STORES? AN ANALYSIS
Executive Summary
This paper is a study of why Sainsbury, on of UK’s Big four retail giants decided to close
down all Netto stores in UK, a business venture it had started with Dansk Supermarked. Primary
data analysis as well as review of secondary data was made to investigate the research question.
The study followed a mixed research design using survey questionnaire on customers and
interview of personnel in managerial position employed by the concerned parties. It was found
that failure of the retail chain, Netto to compete with chief competitors Aldi and Lidl as well as
mounting expansion costs played a hand behind the decision to terminate the venture.

2WHY SAINSBURY CLOSED DOWN NETTO STORES? AN ANALYSIS

3WHY SAINSBURY CLOSED DOWN NETTO STORES? AN ANALYSIS
Table of Contents
Introduction......................................................................................................................................4
Research Question.......................................................................................................................4
Research Objectives.....................................................................................................................5
Methodology....................................................................................................................................5
Analysis Method..........................................................................................................................5
Data Collection............................................................................................................................6
Findings...........................................................................................................................................6
Quantitative Analysis...................................................................................................................6
Qualitative analysis....................................................................................................................12
Conclusion.....................................................................................................................................14
References......................................................................................................................................15
Appendix........................................................................................................................................16

4WHY SAINSBURY CLOSED DOWN NETTO STORES? AN ANALYSIS
Introduction
Netto is a Danish discount store chain based off Copenhagen, Denmark. Through the
course of its history it has been closed on two occasions in the UK, one in 2010 when it was sold
to Asda and the other one when Sainsbury along with its partner Dansk Supermarked in 2016
terminated their trial project of three years to bring back Netto into the UK market as a means to
compete with the emerging competitors Aldi and Lidl in the discounted retail sector.
The decision to terminate the joint venture has rendered 300 of the 400 employees who
worked for Netto UK at the time is a position of uncertainty regarding the job (Butler 2016). The
reasons for the move at a time when Netto was reportedly meeting the set expectations are thus
worth pondering. It begets the question of what may be the factors that drove the retail giant
Sainsbury to abort their business venture. The paper utilizes a combination of quantitative and
qualitative methods to answer the research question and objectives as laid down in the following
sections.
This paper thus seeks to investigate and analyse the causes and motivation behind the
decision taken by Sainsbury and Dansk Supermarked to close down all of Netto’s operations at
all thirteen functioning outlets. The study is based on primary data and secondary data.
Interviews on managers and survey of customers were done to obtain data and market data was
collected through secondary sources to carry out the analysis (Zikmund, Babin, Carr and Griffin
2013).
Research Question
The primary question being addressed through the research is to determine the reasons
why Sainsbury decided to close business operations of its subsidiary Netto in UK in 2016. A

5WHY SAINSBURY CLOSED DOWN NETTO STORES? AN ANALYSIS
question in relation to the primary research question includes whether the decision was impacted
by long term considerations of business and the rationale behind it. Another point of
consideration that is to be addressed is whether competitors Lidl and Aldi had an impact on this
decision and how so.It also takes into consideration whether any other reason could have
affected the decision or not and how.
Research Objectives
The objective of the research is to determine whether the decision to terminated the joint
venture by Sainsbury impacted the company in any positive way and whether they were
successful after execution of the decision in improving business or not and the reasons why
Netto had proved to be not worth further investments by the company. Additionally, the other
objectives include creating an in depth understanding of how Netto failed to garner enough
business to evolve to a much larger scale of business through the joint venture by its parent
companies.
Methodology
Analysis Method
The research had made use of information gathered as per the objectives laid down in the
previous section. The analysis of the information for investigating the specified research
questions has been done in two parts. First a quantitative approach of objectively reading the
available information and understanding the underlying situation that may have drove Sainsbury
to take the decision was conducted. A survey questionnaire design has been used to conduct a
quantitative analysis of customer perception regarding Netto, that is to identify whether it was
doing well enough as a business or not (Yin 2017 ). A comparison of figures with its main
competitors in the discounter sector as well as figures representing customer reception and