U.K. Supermarkets Blur Lines

Discussion
Mar 10, 2006
George Anderson

By George Anderson


Turnabout, as they say, is fair play. While supermarkets here and elsewhere have seen other channels steadily chipping away at their share of grocery categories, store operators in the U.K. are targeting non-food categories to grow overall sales and profits.


Today, supermarkets own an increasingly large share of product categories, including CDs, DVDs, clothing, books and computer games. Over the past five years, for example, supermarket share of clothing and shoe sales has grown from 11 percent to 19 percent of the market. Supermarket sales of DVDs represents 27.4 percent of the total U.K. market.


Teather & Greenwood retail analyst Sanjay Vidyarthi sees the combination of their store’s already strong foot traffic and higher margins paying off for supermarket operators venturing further into non-foods.


The chain that has done the best job so far has been Tesco, Mr. Vidyarthi told BBC News, “For Tesco, two-thirds of the space it’s putting on is non-food. Its Extra formats are now half food and half non-food. With any store extensions, most of the space is non-food.”


Some supermarket operators, such as Wal-Mart’s Asda division, have experimented with non-foods only stores. The company’s Living store format sells clothes, consumer electronics, housewares, CDs/DVDs and jewelry.


“We’re just trying to have a flexible approach across different formats,” an Asda spokesperson told the BBC.


Moderator’s Comment: Are there any lessons from the U.K. experience for American grocery retailers? Do you see something
similar happening in the domestic market?

George Anderson – Moderator

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6 Comments on "U.K. Supermarkets Blur Lines"


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Gene Hoffman
Guest
Gene Hoffman
14 years 11 months ago

The assumption that British and US retailing methodologies should or can be interchangeable is risky. Yes, each should study the other for greater consumer insights, but their individual territories and contents have unique differences. Bill and Don give us some good insights into those differences. Therefore, if there is a lesson to be learned (aka taught) to US retailers, I suggest it be this: Do not follow others as you would that they should follow you. Their tastes, opportunities and objectives may not be the same as yours. Instead, cast your line where your local knowledge and local research reveal where the best local fishing should be done… and how.

Mark Lilien
Guest
14 years 11 months ago

Legacy American supermarkets are losing dominance in their core category: food. UK supermarkets achieved food dominance so they can now conquer nonfoods. If legacy American supermarkets spend time and money on nonfoods, they will lose in both categories, food and nonfood. A unionized American supermarket paying $12/hr with decent benefits that raise total compensation costs to $18/hour cannot compete with a nonunion store (Wal-Mart, Target, Dollar General, any nonunion store) paying $10/hr (I’m being generous) with 35% benefit costs (I’m being generous). The $18/hr firm with minimal experience in nonfoods will beat the $13.50/hr firm with 30 years’ experience?

Herb Sorensen
Guest
14 years 11 months ago

To be truly customer centric, a retailer needs to (at least momentarily) forget who they are, and what they have to sell, and think about the people in their stores as guests; people with needs and desires. Filling those needs and desires is what it is about, and if the retailer can interrupt their own passionate relationship to their own merchandise, maybe they can see ways to make their guests a lot happier – and be a lot more profitable themselves.

And that’s all I have to say about that! :>)

Bernice Hurst
Guest
14 years 11 months ago

There is a very fine line between giving customers what they want and not over-diversifying. The former can create the latter, of course, so that nobody wins. If you can strike the right medium, though, everybody wins. Whether a model starts in one country and is adapted for another is not really relevant; the history of the world is based on people adapting/adopting others’ best practice.

Bill Bishop
Guest
Bill Bishop
14 years 11 months ago

It’s good to see that the U.K. supermarket retailers are broadening beyond traditional grocery departments in categories, but this isn’t really new news in U.S. supermarkets. Retailers like Hy-Vee and Giant Eagle, as well as Wegmans and Meijer, have for a number of years been successfully marketing and merchandising product categories that would fall outside the traditional supermarket or even the traditional food/drug combo store.

At the end of the day, it’s about finding opportunities to grow and doing this in terms of satisfying the needs of current customers.

It’s easy to see how the supercenters have been advantaged by this principle, and there’s no reason to believe that the supercenter is the only retail format where this principle can be successfully applied.

Don Delzell
Guest
Don Delzell
14 years 11 months ago
The UK retail structure is vastly different than that of the US. The niche which WM dominates simply does not exist in the UK. Instead, it is serviced by supermarket chains. Tesco, Sainsbury and others have built general merchandise businesses because of the lack of discount mass merchants. Examining the structure even further, you’ll find that there is no real analogy to JCP or Sears. US grocers must realize and DO realize that the US market is different. Having said that, I am a huge proponent of more intelligent general merchandise assortments in supermarkets. I believe that there are fundamental assumptions about what will and will not sell in the supermarket format, about how the customer shops and what needs can be served which are categorically incorrect. Yes, US supermarkets would benefit from a more strategic and analytical approach to general merchandise management. No, the UK model is not the holy grail to simply copy. One last thought…it is possible, although way out there, that the only viable competition to WM may be Tesco in… Read more »
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