In the money: Supermarkets take on the high street
Supermarket fashions are a force to be reckoned with in the UK, and companies like Asda and Tesco have made no secret of their lofty ambitions to dominate the clothing sector. Convenience and keen prices might be good news for the consumer, but what do they mean for the clothing sector as a whole? asks Richard Woodard.
The grip of the big supermarket chains on the UK clothing retail sector has grown inexorably in recent years, with the tentacles of companies like Tesco and Asda reaching ever further beyond their traditional grocery markets.
The latest research from Verdict Consulting underlines this phenomenon: 62% of UK shoppers regularly use supermarkets to buy non-food items, up from 45% only five years ago.
Supermarkets now command an 11% share of the non-food sector, the research suggests - and their revenues in this area could reach GBP24.4bn by 2012, up 24% on current figures.
Clothing is a key part of the non-food retail battleground, with more and more shoppers popping a couple of shirts or a skirt into the trolley alongside the butter, milk and breakfast cereal.
The reason for this - more than 20% of UK consumers now regularly buy clothing at supermarkets - isn't hard to see.
"What the grocers offer is convenience with very competitive prices," says Neil Saunders, director of consulting at Verdict.
"For the time-pressed, cost-conscious consumer, it is a great advantage to be able to pick up good-priced clothing or electrical items at the same time as doing a food shop."
Good news for the consumer, but is it necessarily good news for the clothing sector as a whole?
Volume versus value
When supermarkets fight it out for market share - which is what they do pretty much all of the time - volume is always going to be a higher priority than value.
Take Asda, for instance.
In March, the Wal-Mart-owned company signalled its intention to become the UK's biggest clothing retailer by volume in only three years, adding GBP500m in clothing sales in the process.
That's quite a leap for a company which currently languishes in fourth position with an 8% market share, closing in on Tesco but still well shy of Primark (10%) and Marks & Spencer (12%).
The man tasked with turning this dream into reality is Anthony Thompson, ironically a former M&S executive.
He has led a back-to-the-future approach including a simplification of Asda's George clothing range, doing away with under-performing labels like the youth-oriented Fast Fashion and Must Have.
Recognising the relative maturity of the average supermarket shopper, Thompson has introduced Moda and Boston Crew, aimed respectively at the 40-plus female and male consumer.
Canny observers might notice a familiar ring to the names…Per Una and Blue Harbour, anyone? Thompson's time at M&S was clearly not wasted.
Renovating the range is only part of the strategy for Asda. Even more important is an aggressive store opening programme under the company's Asda Living banner.
After an unsuccessful trial of stand-alone, high street George stores (which should all be gone by June), the company is planning to open up to 200 Asda Living outlets - incorporating clothing and homeware - in the next few years. Their success will be crucial to the retailer's 2011 target.
Renewed momentum at Asda could scarcely have come at a better time.
Tesco's clothing offer is looking slightly fragile right now: while annual sales outdid the market with a 6% rise, this lagged well behind the overall non-food revenue hike of 12%.
The company also recently halted its trial of online clothing sales - described by Tesco as "always part of the plan", but viewed by many in the industry as an admission that all was not well on the e-commerce side.
And at the top of the shop, M&S currently looks more vulnerable than at any time in the past few years.
Third quarter same-store sales for general merchandise (including clothing) dipped 3.2%, while overall clothing sales fell 1.2%. The company expects tough trading conditions to continue in 2008.
Cost and convenience are key
Of course, nobody is immune to the economic slowdown and its effects on consumer confidence and spending, but consumer behaviour suggests that supermarkets could even benefit from the current downturn in terms of market share.
As people tighten their belts, the appeal of the mass retailers' combination of convenience and lower prices becomes ever more attractive.
Competitive pricing is the secret to the success of Primark, arguably the greatest obstacle to Asda's plans for market domination.
Buoyed by the conversion of its former Littlewoods stores, the value-oriented retailer registered Christmas sales beyond expectations, with first half revenues up 25% to GBP899m.
But Primark too could find itself squeezed between the twin supermarket giants of Tesco and Asda in the years to come.
Most worrying for the clothing specialists is the fact that the pair have increased or maintained their market share while getting things wrong - Tesco currently and Asda in the recent past.
What will happen if Asda's range revamp is a success and Tesco gets its online offer into gear?
And for the big two themselves, the next few years could be a bloody fight for market share.
With operating and sourcing costs rising and the public becoming ever more price-conscious amid an uncertain economic picture, margins are only likely to tighten.
But on the plus side, they have an almost bottomless consumer base on which to draw.
Only 20% of current transactions at Asda currently include a clothing purchase; increase that ratio by a few percentage points and market leadership by 2011 will surely follow.
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