Supermarket job losses

The UK supermarket industry is seeing momentous changes, in particular from the traditional big four (Tesco, Sainsbury’s, Asada and Morrison’s).
In the past these have often been driven by simple tit for tat and relatively minor pricing strategies. However, with the growth of heavy discounters; Aldi and Lidl’, who were ‘newbies’ to the UK market just ten years ago; these prices wars of have become increasingly significant, more frequent, by more industry players and often having greater impact.  

So, along with the rising food costs due to the weak pound because of the ongoing uncertainties surrounded by ‘Brexit’, the UK living wage and the UK governments new apprenticeship levy, are all adding millions to the human resource bill for UK supermarkets.  So is it any wonder that Sainsbury’s, the UK’s second largest supermarket with just under seventeen percent market share is deciding to make further savings through job cuts to reduce the annual wage bill.  Well, perhaps not, if we consider the slow and incremental drip feeding of information relating to employment from Sainbury’s and the wider economy. 

The cull of jobs started in March of this year, where four hundred jobs; a relatively small number when compared to the figures in this week’s announcement; from its shop floor operations were being reduced. The operatives affected by this announcement were those in price controller positions. This function was not made redundant, rather redeployed to other shop floor workers and the four hundred workers that were affected were either offered redundancy or redeployment within the company. Therefore the business adopted a working smarter initiative.  However, also at the time of this announcement, a further four thousand workers were informed they faced significant changes to their hours of work, in a big shake up of night working operations.  

The recent announcement affecting two thousand workers does not appear to be affecting the forward and customer facing operations.  Rather the grocery chain is looking at reducing staff in its support and back office operations and human resources.  Warnings were on the horizon in August when the Sainsbury’s hinted that it was pulling together a ‘reduction in staff plan’ to reduce its operating costs in order to consolidate its current positions as the UK’s second largest supermarket.  At this time it employed just over three thousand workers outside of it stores in supporting roles.  Maybe this cost cutting exercise has been on the horizon for much longer, if we consider that last year Sainsbury’s acquired the high street and online retailer Argos for £1.4bn.  In doing so it acquired additional workers that have similar back office operations roles (i.e. Finance, Human Resources etc.) across the two businesses.  As such, it would make logical and economic sense to consolidate and centralise some of these core and common human resources. In addition, the UK’s first choice supermarket; Tesco; has already undertaken the back-office cost cutting exercise early on in this year in June, announcing the loss of two thousand three hundred jobs split between its head office and Cardiff call centre.

Therefore, perhaps the acquisition of Argos, is strategic long term plan, as Sainsbury’s again seems to be benchmarking Tesco’s movements who acquired Booker early on in 2017.  Although Tesco was not buying new stores; something that would have drawn unwanted attention from the watchdog; it had in effect expanded its supply chain infrastructure to that will already have in place the skill to support its ‘LeAgile’ operating strategy.  However, a significant and important negative point to note from all this, is Tesco now not only supply its own convenience stores, but also those of its competitors.  Unfortunately, this may open up the possibility of price fixing and numerous other anti-competitive practices. Therefore, this may be one of the key drivers in Sainsbury’s decision to move forward quickly with both the recent acquisition of Argos and its back office human resource cost cutting exercise.           

It is perhaps therefore understandable why the particular focus on cost cutting at this time of the year, is on the supporting roles and not front line operational roles, particularly as this sector is working hard to recruit extra capacity in the build up to Christmas.  The immediate knock-on impact of reduction in this area of employment would almost certainly be higher costs of the product retailed by Sainsbury’s, and other similar businesses.

However, this is not to say the front of shop operations will be affected after the Christmas period is over. What is certain, this is a fast moving industry that has multiple facets in meeting the customer requirements, as such it needs a strong employee base that is ‘agile’ enough to meet these changing demands.  However, what is not as certain is the impact Brexit will have on the employee base in this industry in general.  A recent survey by the British Retail Consortium suggested that “fifty six percent of retailers revealed that their EU colleagues are concerned about their right to remain in the UK”, in addition twenty two per cent of these UK retailers reported that some of their workers from the EU have already made their choice, by leaving their jobs and returning home.  Also, the uncertainty created by Brexit could be having an impact on the customer.  The Bank of England has very strongly hinted that it is going to increase the base rate next month, in order to curb UK inflation.  Inflation is currently at fiver year high of three percent, with the prime cause being the increases to food and fuel prices due to the weak pound, which is a direct impact of the Brexit uncertainty.