Analysis of Sainsbury's Netto Closure: Interview Insights & Strategy

This case study examines the reasons behind Sainsbury's decision to close Netto stores, based on an interview with a manager. The decision wasn't due to Netto underperforming, but rather Sainsbury's assessment that significant investment would be required for Netto to achieve large-scale success, a commitment they were unwilling to make, especially with the upcoming HRG deal. Challenges included securing suitable properties and adapting Netto's promotional strategies to the UK market. The decision factored in customer reviews, market data, and the competitive landscape, leading Sainsbury's to refocus on its core business and commitment to HRG. Desklib provides access to similar case studies and resources for students.

INTERVIEW QUESTIONS: Manager A (Sainsbury)
1. Was the decision to close down Netto’s operations in UK because it was not
making enough business? Did it not live up to expectations?Could you
elaborate on this.
No not really. Netto met the laid down expectations for business. So it was not
that. Its more to do with that Salisbury felt that for the venture to be successful on
a larger scale, it needed a lot of investment, not that it was not a good opportunity.
We did not feel that the path to our future goals aligned with the investment that
was required for taking Netto to the big leagues. Netto was however a very
valuable learning experience and like it has been said before it was not only about
penetrating the discounter market, but an exercise in building efficiency in
business and that is a key takeaway. Its just that to make Netto big, you need a lot
of investment and Salisbury is did not feel that it could commit to that right now,
especially with the new deal with HG coming up.
2. What are the challenges that the venture faced?
One of the primary challenges was securing property for the physical outlets. It
was tough to find spots and gain permission where business was deemed to be
promising. Also, it was felt that perhaps the UK public are not well adjusted with
the kind of promotional sales that have worked for Netto among the Dutch public,
so Netto needs to come up with an alternate strategy that would draw in people
here as well. Lookoing at our competitors ALdi and Lidl, you can say that they

have been more successful in tapping into that and that was also one of the
challenges we faced. To overcome them, a lot of work needs to be put and if done
correctly no doubt the venture looks to be promising. However unfortunately
situation is such that its just not feasible at the moment on our part.
3. So what made you make this decision?
It was a combination of considering customer reviews that we have got, the trade
market data and the expansion cost that was required to make Netto a success. It
has also been observed that the number of discount store shoppers are on a
decline in the UK. Also with our competitors already bring so well established it
would have taken a lot of growth in a very short time which would have to be
sustainable for the venture to succeed. That also played in.
4. What are your plans for the future?
We plan to focus on our core business now that we have gained a lot of insights
from Netto. Also we hope to fully enforce our commitment to HRG.