The future of retail contracts

[headgasket]

The future of retail contracts
I have been looking at articles in magazines and online for a few years now and have come to the conclusion, that all the big players in the game, are within a few years going to bring all their service needs in-house on the same lines as City and Asda.
Justin King the CEO of Sainsbury’s’ stated in an article a few years ago in the RAC news that with the conversion of all his stores to CO2 they would have their own trained engineers looking after them, now with Sainsbury’s having brought a stake in ARCUS FM, and they are looking after the London and SE of England (Refrigeration ) its only a matter of time before they have all the estate, Tesco’s’ looks like they are going this way, with the acquisition of Project First last year.
What would be the impact on us, good or bad?

[cold.man]

i think that process has already started well will do as of the 10th of june with sainsburys and CBES, the sainsburys contract will be run the same as the asda contract within a few years i would suspect.
i think tescos are back peddling from CO2 but within the next 5 years i would suspect all sainsburys will be CO2.

[r.bartlett]

But Sainsbury just sold their 50% of ARCUS (FM or Eng or both I'm not sure) back to ARCUS so that's a bit of a reversal

[jonjon]

dont really have much to do with supermarkets but alot with high street shops they just seem to change between mitie >carillion >gsh >integral starting to get a collection of t-shirts now!

[Moneyhell]

I can see the logic behind the original post but I am not sure.

Sure, ASDA and City are doing their thing, it would be easy to say Sainsbury's 'could' go the same way with Arcus but it would more likely be a transfer to Arcus and not Sainsbury's and anyway, the contract just signed is for 5 years. Tesco did not acquire P1, P1 simply invoiced millions up front and got in trouble, thrashed about for a couple of years and has now gone bust. Tesco do have their own in-house refrigeration team in London but it performs worse than the three refrigeration contractors.

Ultimately, I think the thing that would probably stop it happening is that the retailers would have to take on the risk, engineering and overhead cost, which would then make it very difficult to effect change, especially with UK employment law.

[mad fridgie]

I think you need to understand the ASDA/City relationship "closed fence and open book"
"All" costs associated to the contract are charged for, if a pencil is required by a Secretary, then the pencil is charged for at very, very low margin. There is minimal risk for city, as gross profit and net profit as very similar.
It is my understanding that City pays it engineers well, but does ask for blood.
It would seem the model does work, as this relationship has been in operation for quite some time.
Is the Asda equipment better maintained, do they loose less product and down time.??????

[joe magee]

I know here in the states Some Larger chains Kroger, Safeway and WalMart have both in house and use outside contractors it depends on the state they are in. One chain, Stater brothers (150 stores) use in house techs. Each tech is responsible for 12 stores and they are maintained great. The pay is always much less in house and to cut down on overtime four ten hours days are the norm. Most service techs consider it a retirement job.Tesco is here also and they use outside contractors.

[Oleg]

Tesco statistics shows what Tesco in-house team is slower, but after in-house job (repair/ downtime) equipment works better and longer. As well cost of maintaining fridge side is lower then contractors. BUT techs are not getting paid even average, so in-house team has engineers running out as soons as they can.