Sainsbury knocks on Argos’ door to take the deal

Marketing or negotiating? That is the question posed by some readers who were intrigued with the issue of bidding from Sainsbury to Argos. Is it marketing—or is it another business agenda?

Is Sainsbury competing?

Today’s generation is already highlighted by unique and fast technology. Many people rely on the internet, delete files without breaking a sweat, and find better ideas in just one click. Online functionality is now considered essential, which is the reason Sainsbury got the idea of doing business with Argon. Rivalry is always present when we talk about business, and competition is generally accepted as a necessary condition for the coordination of disparate individuals’ interests via the market process. It is a condition where “buyers tend to compete with other buyers and sellers tend to compete with other sellers.”

"The stakes are now being raised on same-day deliveries for groceries," Sainsbury's Chief Executive Mike Coupe told Reuters on Dec. 3 when discussing the impact Amazon was having on the U.K. grocery market, where it is not yet a big player.

"You could argue that they're already having an impact in the way that people are thinking," he said, noting that Sainsbury was looking at same-day grocery deliveries. Sainsbury is a good competitor and has performed a better job, unlike rivals Tesco (TSCO.L), Asda (WMT.W), and Morrisons (MRW.L)

Analysts have realized that the deal could speed up Sainsbury’s deliveries and widen its range with electronics. They planned to shut down some Argos stores, sell their own products to others, and open an accommodation. 

Amazon being competitive

Within competitive markets,markets are often defined by their sub-sectors, such as the “short-term” or “long-term” market, the “seasonal” or “summer” market, or the “broad” or “remainder” market. The competitive process in a market economy exerts a sort of pressure that tends to move resources to where they are most needed and can be used most efficiently for the economy as a whole.

Amazon offers delivery within one hour for members of its Prime subscription service in a limited number of city-center postcodes or in a two-hour same-day window. Experts predict retailers will only be able to keep up with Amazon if they can strike a balanced with higher-priced goods.

Sainsbury is prepared for grocery competition from U.S. online giant Amazon (AMZN.O). Amazon is the largest internet-based retailer in the United States and also sells certain low-end products. They also offer international shipping for some of its products to a limited number of other countries.

Home Retail Group, Argos, and Home-Base

"There would be synergies from optimizing the combined group's property portfolio, but that might not be entirely straightforward with Home Retail's lease liabilities," said one major institutional shareholder in both companies.

Home Retail Group’s retail businesses bring outstanding value and convenience to customers’ everyday lives whether shopping at home or on the move. Argos has an outstanding offer of convenience, choice and value to meet customer needs, selling products through its 840 stores, its website, and mobile apps. Home-Base is a leading home and garden improvement retailer, offering a growing range of products in a differentiated store environment.

"We believe there is significant intrinsic value in the business," said Cantor Fitzgerald analyst Freddie George, who rates Home Retail a "buy" with a target price of 195 pence.