Shopping is moving online, and it has been for years. We all know it, and the chances are all of us have made the shift to one extent or another ourselves over the past few years.
Exactly what we are willing to buy online however, or perhaps rather the stores we are willing to buy it from, seemed to make itself clear earlier this month when J Sainsbury (LSE: SBRY) said that over the Christmas period, its strong sales in food and clothing were offset by poor numbers at Argos, notably for toys and computer games.
The ‘A’ elephant in the room
This of course, makes total sense to anyone who partakes in online shopping. For food and groceries, you head over to the online version of your favourite high street store – such as Sainsbury’s, Tesco or Ocado. You know the food you like, so you can buy it online easily. You know you are getting the same price you would do in-store, without the inconvenience of actually having to go there and carry your groceries home.
Interestingly supermarket fashion seems to be seeing a similar pattern. I think this is down to the branding, trust and familiarity with supermarket clothing lines these days, coupled with the value price tag for clothes of reasonable quality. Better design helps too, as well as general one-stop-shop convenience.
So why did Argos suffer during what should have been its most profitable time of year? Well let me ask you a question: apart from food and clothes, if I asked you to buy a toy, video game, or almost anything else online, where would you go first? I suspect that for most of us the answer is Amazon.
The large number of products, the competitive pricing and the familiarity with the process (if you have bought a toy from the UK on Amazon, there is usually little difference in the process than buying a set of golf clubs from China or a gas stove from Italy), make that the first online stop for most of our shopping needs.
Stick to your strengths?
For those of us of a certain age in the UK, Argos has a brand that we can’t help but associate with Christmas/birthday/treat happiness. Having looked through the catalogue for potential gifts or things to spend my pocket money on as a child will always leave me with a certain fondness for the brand.
Unfortunately for Sainsbury’s, I will still do my general merchandise shopping on Amazon, and I think most people are the same. This brand fondness did little to save Woolworth’s after all – another store in which I (and many others) used to spend pocket money.
I think this raises the idea that perhaps Sainsbury’s would benefit from sticking to its strengths. As much as we may collectively experience moral outrage about a giant like Amazon gaining a monopoly (and rightly so), one could argue that Sainsbury’s will see a greater benefit from not trying to compete directly in its arena. For food and clothes on the other hand, we will all still get in line.
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The Motley Fool UK has no position in any of the shares mentioned. Karl has shares in J Sainsbury. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.