The launch of Sainsbury’s Bank
A Sainsbury's Bank case study

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Page 2: The launch

Sainsburys Bank 4 Image 3On 25th October 1996, J. Sainsbury plc and Bank of Scotland announced they were to launch a joint venture bank in February 1997. The Bank would be 55% owned by J. Sainsbury plc and 45% owned by Bank of Scotland. A joint venture is a partnership which allows businesses to keep their independence at the same time as sharing their expertise. A joint venture means that two organisations work together on a specific project – for example, a washing machine manufacturer and a soap powder producer join together to create a television commercial, or two car manufacturers decide to share the research and development costs of a new engine which they will both later use in a range of models.

Sainsbury’s was the first supermarket retailer to form its own bank. It is licensed by the Bank of England, which has the role of ensuring the reliability and financial strength of all banks in this country. Sainsbury’s decided to launch the bank following extensive research of its customer base. Sainsbury’s is well positioned to offer retail financial services - it has a loyal customer base of some 10 million people who have indicated that they want good, efficient and reliable banking services. The bank is a natural extension to the type of services already offered to Sainsbury’s customers.

Bank of Scotland was chosen as the best partner for the joint venture. Combining Sainsbury’s retailing and marketing experience and reputation for good value and trust with Bank of Scotland’s product range, record of innovation and telebanking experience has resulted in a compelling alternative to traditional banking.

It is not possible to create a nation-wide banking operation overnight. Instead, the best way is to establish a presence and then extend this presence over the course of time to develop a well organised network. Sainsbury’s Bank has set itself the task of breaking even within a two year period. The first stage of the launch involved offering a 24-hour direct banking to customers of its supermarkets, hypermarkets and DIY outlets in Scotland and in north and central England. The regional roll-out was carried out to avoid stretching customer service before moving on to open up across the whole of the United Kingdom.

One of the most important business lessons that can be learnt is to avoid the danger of overtrading. Business history is littered with examples of businesses that failed from having tried to extend a good idea too quickly. A business that overtrades can overstretch its resources, leading to poor quality service and collapse. In the case of Sainsbury’s Bank, this did not happen.

The launch and expansion of Sainsbury’s Bank was founded on the following good business principles:

  • identify your market
  • allocate your resources to secure your objectives
  • build sound networks.

Once you have secured your position, then you can expand.

Sainsbury's Bank | The launch of Sainsbury’s Bank