Non-Food Sales in Supermarkets Market Assessment 2010
Key Note Publications Ltd, November 2010, Pages: 105
Although the multiple grocery chains have offered non-food basics such as toiletries, disposable paper products and cleaning items since first opening in the 1950s, it was the abolition in the 1960s of Resale Price Maintenance (RPM) on most products, whereby a manufacturer and its distributors agreed that the latter would sell the former’s product at certain prices that enabled supermarkets to compete on price. The relocation to larger out-of-town sites in the 1980s also gave many supermarkets the additional space required for extending their non-food offering. Walmart’s acquisition of ASDA in 1999 cemented the concept of selling non-food products other than basic household goods on any significant scale and the practice is now an important activity of the major multiples, not least because it offers better profit margins and the opportunity to differentiate one chain’s offering from that of its competitors. Tesco is now the largest retailer of non-food in the UK, having overtaken the likes of Argos, and takes a multi-channel approach with different store formats, online and catalogue sales and the opening of standalone non-food stores. The development of online shopping facilities has also enabled the likes of Tesco to deliver large electrical appliances, music and books and gardening equipment, etc., direct from manufacturers and warehouses and August 2009 saw the opening of Tesco’s first purpose-built facility for imported non-food items based in Teesport. In addition to selling non-food items, the supermarkets also now sell services and utilities, capitalising on their trusted brand, maximising the information derived from loyalty schemes and forging partnerships with other companies.
Some of the non-food brands, notably ASDA’s George clothing brand, have been phenomenally successful, while stores may also ‘cherry pick’ lines, taking advantage of the time and investment that manufacturers and specialist traders have put into knowing their markets and varying products on offer according to the season. Both Tesco and ASDA have made no secret of their intent to extend their non-food offering, while Sainsbury’s and Morrisons have both re-launched extended ranges, with the latter also considering the introduction of an e-commerce site and John Lewis products are available via its supermarket partner, Waitrose.
Convenience, value and choice are the obvious reasons for consumers to choose supermarkets in which to purchase non-food goods and, where once a lack of specialist knowledge might have been a stumbling block for supermarkets, Tesco has been at the forefront of change — employing more than 1,000 Tesco Tech support staff to advise on electrical goods such as mobile phones, etc. In the last financial year, Tesco alone increased its non-food sales revenue by 6.2% from the previous year to reach £13.1bn in February 2010.
The recession of 2008/2009 has, however, caused shoppers to cut back on certain discretionary spending which has impacted the non-food market and slowed down growth within the sector. With space at a premium and stricter planning regulations intended, opportunities for further growth in the UK are limited, while the practices of the major supermarkets are to come under scrutiny from the new Government’s intended supermarket ombudsman. Tesco, which already has stores in Korea, the People’s Republic of China (PRC), Thailand, Japan and a joint venture in India, is intent on increasing its hold in Europe and Asia. In September 2010, it made a bid for 61 stores across Malaysia, Thailand and Singapore, that French rival, Carrefour, was putting up for sale, but was dropped from going forward to the next round of bidding scheduled for November 2010. The British chain has been trialling a franchise scheme in South Korea in which it and the franchisees share opening costs and profits. Representing an entirely new strategy for growth, Tesco’s international head, Philip Clarke, who will become Chief Executive (CE) in 2011, has said this may be a future growth model for other countries, as it strives to catch — and possibly overtake — international rivals, Walmart and Carrefour, in its quest to become the world’s leading supermarket chain.
Foreword
Executive Summary
Introduction
OVERVIEW
DEFINITION
Background
The Effect on Suppliers and Other Traders
Possible Threats
Potential for Growth
Strategy Overview
INTRODUCTION
MARKET DYNAMICS AND SEGMENTATION
Development, Characteristics and Trends
THE EFFECT ON OTHER MANUFACTURERS AND RETAILERS
DISTRIBUTION
COMPETITIVE STRUCTURE
ADVERTISING
THE CONSUMER
MARKET FORECASTS
Products and Services
PRODUCTS
Cosmetics, Fragrances and Toiletries
Pharmaceuticals, Vitamins and Supplements
Clothing
Household Cleaning
Soft Furnishings
Books, Greeting Cards and Stationery
Jewellery
Kitchenware, Electrical Appliances and Home Entertainment
Telephones
Plants, Flowers and Garden Equipment
Toys and Novelties
Alcohol
Petrol
Reusable Bags
SERVICES
Catering
Financial Services
Insurance
Travel Agency
GP Surgery
In-Store Dental
Utilities
Estate Agency
Telephone and Internet Services
Photoshops
DVD Hire
Mother and Baby Facilities
Recycling Facilities
Air Miles
Other Miscellaneous
Market Size
TOTAL RETAIL SALES VALUES
NON-FOOD SALES VALUES ATTRIBUTABLE TO GROCERY MULTIPLES
Current Issues
CONSUMER ISSUES
Lifestyles
Number of Households
Purchasing Profiles
Home Shopping
Average Weekly Expenditure
Consumer Associations
SUPPLIER ISSUES
Home Delivery
Grey Market Imports
Opening Hours
Resale Price Maintenance
National Minimum Wage
Loyalty Schemes
Investigations into Profiteering
Land Banks
An International Perspective
BACKGROUND
PEST Analysis
POLITICAL
World Economic Forum
The National Minimum Wage
The Budget
ECONOMIC
Value Added Tax
Job Losses
The Retail Market
SOCIAL
Lifestyles
Bankruptcies and Insolvencies
Fairtrade
Community Initiatives and Charity Support
Improving Green Credentials
TECHNOLOGICAL
Electronic Point of Sale
Check-Out Technology
Consumer Dynamics
CONSUMER RESEARCH
PURCHASING OF CLOTHING AND USAGE OF CASHBACK SERVICE
Clothing
Cashback
PURCHASING OF ELECTRICAL GOODS AND PETROL
Electrical Goods
Petrol
USE OF IN-STORE PHARMACY FOR ADVICE OR PRESCRIPTION
Usage of In-Store Pharmacies for Advice
Usage of In-Store Pharmacies for Dispensing Prescriptions
PURCHASING OF NON-FOOD ITEMS ONLINE AND OPINION THAT SUPERMARKETS SHOULD CONCENTRATE ON SELLING FOOD ONLY
Purchasing of Non-Food Items Online
Opinions that Supermarkets Should Concentrate on Selling Food
Company/Supplier Profiles
PRINCIPAL COMPETITORS
Tesco PLC
J Sainsbury PLC
ASDA Group Ltd
Wm Morrison Supermarkets PLC
The Co-operative Group Ltd
OWN-LABEL VALUE SHARES
COMPANY ADVERTISING
Expenditure on Products
Advertising Expenditure by Company
Recent Promotions
Advertising Standards
Types of Promotions Favoured
DISTRIBUTION
Supermarkets' Estimated Share of Selected Non-Food Items
The Future
EXPANSION
TURNOVER
DEMOGRAPHICS AND ECONOMIC CLIMATE SHAPING THE FUTURE
Further Sources
Associations
Publications
General Sources
Government Sources
Other Sources
Key Note Sources
Key Note Ltd
Understanding TGI Data
Number, Profile, Penetration
Social Grade
Standard Region
- Tesco PLC
- J Sainsbury PLC
- ASDA Group Ltd
- Wm Morrison Supermarkets PLC
- The Co-operative Group Ltd
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