UK Non-food in Grocers 2011

Introduction

Verdict Research: Growth in the non-food market is set to become more elusive for grocers as pressures increase on discretionary spending and initial gains from entering new product categories begin to wane. We highlight the key trends and drivers which will impact the channel going forward as well as providing forecasts for grocers' sales in each of the non-food categories which they operate in.

Features and benefits

• Discover which non-food sectors provide the most growth opportunities for grocers and how they must develop propositions to take advantage of these
• Understand how grocers have performed in non-food using individual growth rates and market share analysis for the Big Four
• Use our comprehensive profiles of the Big Four players: Asda, Morrisons, Sainsbury's, Tesco to ensure you are best prepared to defend market share
• Understand how smaller grocers are building their non-food propositions

Highlights

The non-food market has been badly impacted by tough economic conditions causing many consumers to cut back on discretionary spending. Growth in non-food sales for grocers is beginning to slow. This is partly down to the difficult non food market, but also due to space growth having less of an impact on non-food sales and slowing sales densities.
Convenience has been a major driver of success for grocers in non-food and this is set to remain a key advantage that grocers need to leverage when looking for future growth. However, their convenience advantage over competitors will be eroded over time as multichannel expansion allows competitors to provide added convenience for shoppers.
Grocers must start addressing the areas in which they are weakest to build their appeal further, particularly as non-food expansion remains high on the agenda for three of the Big Four and competition is set to become more intense. Building brand authority will be fundamental to their success in a more competitive market.

Your key questions answered

• What should grocers do to develop their non-food propositions further and how can they build their authority in the sectors they operate in?
• How will non-food in grocers perform up until 2014 and what opportunities do individual categories present?
• Which grocer threatens the most in the non-food sector and how can others protect their market shares?

Table of contents

Executive Summary
Key findings
In a challenging non-food market – grocers increase share;
Gains lessen as market begins to mature;
Tesco and Asda dominate …
… though Sainsbury's makes rapid gains;
Convenience becoming ubiquitous …
… meaning grocers must build brand authority in non-food sectors;
Health & beauty is the sector in which grocers have the highest channel share;
Opportunities remain in all sectors – particularly homewares.
Main conclusions
Competition intensifying in a difficult non-food sector
KEY ISSUES
Competition to intensify
Higher sector authority required to combat continued expenditure slowdown
Increasing grocer penetration of non-food
Shopper numbers rise in all but one sector
Grocers sales growth set to slow
Low non-food expenditure growth …
… and weaker non-food volume growth will bring challenges
Big four space gains to continue
Despite slowing sales, space growth continues unabated
While smaller, convenience stores can enhance non-food offer …
… hypermarkets still core to capitalising on one-stop shopping …
… resulting in greater competition with each other and specialists expanding OOT
Multichannel increases non-food offer of all stores
Click & collect core to continued success of grocers in non-food
Instore kiosks convert footfall to non-food sales
French model of click and drive pioneered in the UK by Tesco
Grocers can lead the way in m-Commerce developments
Convenience key to grocers sales
Grocers exceed sector average for convenience scores across all non-food sectors …
… but convenience to become ubiquitous as multichannel improves
Grocers can fight back
Grocers must build authority in non-food
Must look beyond convenience to grow sales
Service and range in need of particular attention
Should look to specialists for inspiration
Building brands
Next stage of non-food growth to be driven by strong branded offer
Department stores such as Debenhams set the standard
Strongly branded offer opens up greater international opportunities
Sector opportunities
UK non-food market matures
Focus on brands and visual presentation in clothing & footwear
Fragmented market will provide opportunities in homewares
Electrical sales growth to slow and focus to switch to online
Gifts, better and best product offer opportunities in health & beauty
Strong online offer required in music & video as sales fall into decline
MARKET ANALYSIS
Definitions
Summary
Non-food growth slows as consumers resist discretionary purchases
Non-food market
[Missing title]
Non-food volume growth dips
Grocers non-food sales
Gains slow but non-food remains central to growth strategies
Grocers non-food space
Non-food space growth begins to slow, though continues to gain prominence instore
Non-food market forecast to 2014
Outlook for non-food remains tough
Grocers non-food market forecast to 2014
Grocers maintain advantage in difficult market
LEADING COMPANIES DATA ANALYSIS
Non-food market shares
Operating statistics
Space allocation
How reduced non-food space is allocated in superstores and hypermarkets
Standalone non-food format space allocation
Advertising spend
Grocers account for four out of the Top Five in retailer advertising spend
ASDA
Aims to be number one in UK non-food in five years
Recent key events
Conveying quality key to growth
Proposition
Focus on clothing and homewares to drive footfall to non-food
Financials
Sales growth slows down
Price positioning drives footfall and sales
Space
Netto stores will boost numbers
Sector analysis – non-food
Space allocation
Non-food growth rate declines as Asda loses momentum
Market shares
Asda struggles to lead grocer charge into non-food
Outlook
Improving and not just expanding offer will prove challenging
MORRISONS
Readies itself for baby steps in non-food online
Recent key events
New chief executive provides continuity
Proposition
Strengthening price architecture a major focus
Financials
Trading performance defies recession
Profit growth remains in double figures
Space
Sustains space growth despite recession
Sector analysis – non-food
Space allocation
Strategy step-change requires compelling range and promotion to succeed
Market shares
[Missing title]
Outlook
Food remains core but Morrisons readies itself for online non-food venture
SAINSBURY'S
Non-food central to making Sainsbury's "great again"
Recent key events
Presses on with expansion to regain second place among Big Four
Proposition
Room for sub branding development to gain prominence in non-food
Financials
Non-food growth driven by space expansion
Profit growth slows but still ahead of sales
Space
Rapid growth in supermarkets and convenience stores
Sector analysis – non-food
Space allocation
Expansion and multichannel drive growth in non-food
Market shares
Gains set to level off as competitors provide enhanced offer
Outlook
Improvements in non-food marketing will enhance space expansion gains
TESCO
Aims to get non-food back on track
Recent key events
Clear strategy to further progress in non-food
Proposition
Price architecture a major focus
Financials
New space drives sales growth
Non-stop growth across sales and profit
Space
Sustains space growth despite recession
Sector analysis – non-food
Space allocation
Growth recovers in 2010/11
Market shares
[Missing title]
Outlook
Focus on non-food and loyalty will help maintain share as competition intensifies
SMALLER PLAYERS
The Co-operative
Plans to further extend neighbourhood storebase but non-food is a squeeze
Waitrose
Non-food remains peripheral but provides potential for further growth
OTHER SMALLER GROCERS NON-FOOD OFFERS
Discounters: and then there were two
Aldi and Lidl dominant after exit of Netto
Aldi
Lidl
Ocado
Iceland
SPAR
SECTOR COMPARISONS
Main non-food markets in which grocers participate
Health & beauty and clothing & footwear remain strong as sales growth in other non-food sectors dwindles
Grocers non-food components
Weak competition helps grocers make rapid sales increases in electricals …
… though clothing & footwear looks set to be next target for growth
More effective merchandising required to diversify non-food sales
Grocers non-food space allocation by sector
Proportion of non-food space falls as online gains greater emphasis and growth slows
Grocers non-food sales forecasts by market component
Health & beauty remains grocers stalwart with solid growth forecast …
… while music & video and electricals sales pose greater challenges
CLOTHING & FOOTWEAR
Channels of distribution
Grocers take share …
Grocers sales
… but market gains slow
Grocers shares
Sainsbury's becomes engine of growth
Pricing architecture
Price points of key products
Opening price points
Closing price points
Range architecture
Womenswear
Menswear
Childrenswear
Outlook
Competition intensifies as Sainsbury's pushes in clothing
Focus on building brands as quality becomes more important
Need to create a specialist experience
Multichannel a big opportunity
ELECTRICALS
Channels of distribution
Grocers join in pillage of specialists channel
Grocers sales
Fall in demand makes electricals a tough sector for grocers
Grocers shares
Grocers make only small market share gains as price shows limited appeal
Pricing architecture
Price points of key products
Opening price points
Closing price points
Range architecture
Specialists still ahead but grocers enlarge ranges
Outlook
Footfall in decline as concerns about the economy persist and few innovative products are launched
Driving market share gains proving challenging
HEALTH & BEAUTY
Channels of distribution
Big Four gain share from specialists
Grocers sales
Grocers focus on non-food expansion continues to provide growth
Grocers shares
Tesco continues to dominate with Asda making ground
Pricing architecture
Price points of key products
Opening price points
Closing price points
HOMEWARES
Channels of distribution
Specialists are squeezed as grocers and non-specialists diversify into homewares
Grocers sales
Take advantage of retailer casualties
Grocers shares
Tesco just holds on to first position
Pricing architecture
Price points of key products
Opening price points
Closing price points
Range architecture
Lack choice compared to non-grocer rivals
Outlook
Opportunities for grocers in fragmented market
MUSIC & VIDEO
Channels of distribution
Decline of specialist retailers provides opportunities for growth
Grocers sales
Grocers share grows
Grocers shares
Tesco loses momentum as online retailers start to dominate
Outlook
Grocers could gain further share from decline of specialists
Young music & video shoppers find grocers unappealing
Grocers shoppers more prone to government cuts
Grocers need to leverage online food offers
OTHER NON-FOOD
Discretionary categories continue to suffer from restricted spending
Grocers sales
Grocers benefit from convenience and value-driven shopping
Grocers other non-food offers
Books, news & stationery
DIY & gardening
Furniture & floorcoverings
Sports equipment
Toys & games
APPENDIX
Financial statistics – VAT
Financials
Stores
Abbreviations
Methodology
Technical appendix
Clothing & footwear
Electricals
Health & beauty
Homewares
Further reading
Ask the analyst
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