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| MAPS : Non-Food Sales in Supermarkets: 2002 |
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This report covers: non-food sales in supermarkets, books, and, stationery, clothing, cosmetic, toiletries, DIY, electrical goods, garden equipment, holidays, home entertainment, hosiery, lingerie, linens, mobile phones, petrol, pharmaceuticals, vitamins, supplements, toys, novelties, services, air miles, beauty shops, catering, coffee shops, restaurants, take-aways, clubs, financial services, banking, Own-label value shares, petfood, toiletries, two-for-one promotions,home shopping, internet access, mother-and-baby, facilites and Crèches, photoshops, recycling facilities, telephone services, utilities, cleaning products, Sunday shopping,
This report covers: Sainsbury's, Bank, Tesco, Personal Finance, ASDA, insurance, Safeway, Wm., Morrison, supermarkets, Morrisons, Somerfield,
EXECUTIVE SUMMARY
| Executive Summary |
| Multiple grocery chains have carried non-food items, to some extent, since supermarkets first appeared in the 1950s. Their range tended to be limited largely to household necessities that the consumer would require regularly and frequently, such as basic toiletries, disposable paper products and cleaning items. In the 1980s, the move to larger out-of-town sites gave many supermarkets the additional space required to extend their non-food offerings. ASDA, in particular, focused on non-food, not least because its stores are generally much larger than those of its competitors. |
| Now, non-food offers a method of differentiating one chain from another in a way that is not always possible with food. Recognising that price is not always of paramount importance, the multiples have concentrated more on quality and customer service. Another attraction is the fact that profit margins are higher in non-food. In fact, allegations of profiteering were made against the major supermarket chains although the Competition Commission, having investigated during 1999/2000, concluded that the industry is broadly competitive and that, overall, excessive prices were not being charged nor excessive profits earned. Supermarkets faced further criticisms of profiteering from the foot-and-mouth crisis of 2001, and it is ironic that the accusations convinced many people to shop for food from local specialists and farmers' markets, yet these same supermarkets are increasing their share of non-food retail markets, such as clothing and health and beauty. Far from charging high prices, ASDA and Tesco, in particular, have fought for the right to source designer goods from `grey markets' outside the EU and resell them at lower prices than those recommended by manufacturers anxious to retain the exclusivity of their brand names. The supermarkets have, for the time being, been thwarted in their attempts by a ruling from the European Court of Justice on 20th November 2001 but have vowed to fight on. ASDA, meanwhile, has embarked on further price cutting, able to take advantage of the formidable buying power of its parent company, Wal-Mart. |
| The multiples continue to extend the choice of branded and own-name non-food, and the development of online-shopping facilities has enabled companies, such as Tesco, to deliver large electrical appliances, music and books, gardening equipment, etc., direct from warehouses. There is no doubt that today's consumer likes the convenience of one-stop shopping and that supermarkets are eager to exploit their huge advantage over specialist retailers, that of footfall — i.e. the numbers of customers crossing the threshold. They already have millions doing so every week to shop for their groceries, so it is only logical to offer them everything else they may need, from prescription medicines to clothes, to perfumes and kitchenware. In all too many cases, the involvement of the multiples in the non-food market, with their space and their ability to undercut prices and `cherry pick' lines led to the demise of independents but, in some cases, they have been successful in extending the market through consumers buying on impulse. A more recent foray has been into provision of services, capitalising on their trusted brand, and forging partnerships with other companies. For example, Sainsbury's is supplying gas and electricity in a joint venture with Scottish Power, while Tesco Personal Finance offers mortgages, loans, etc., in a tie-up with the Royal Bank of Scotland. As a spokesman for Sainsbury's has said, which must be equally true of Tesco: |
| "Sainsbury's intention is to use its assets — marketing and customer-service expertise — to enter new markets outside its core groceries market. The intention is to enter typically complex, complicated and probably dull markets and add value to them." (Marketing Week, 25 October 2001). |
TABLE OF CONTENTS
| Executive Summary | 1 |
| 1. Introduction | 3 |
| Overview | 3 |
| Definition | 3 |
| Background | 3 |
| Extent of Products and Services | 4 |
| The Effect on Suppliers | |
| and Other Traders | 4 |
| Possible Threats | 4 |
| Potential for Growth | 5 |
| 2. Strategic Overview | 6 |
| Introduction | 6 |
| Market Dynamics and Segmentation | 6 |
| Development, Characteristics and Trends | 6 |
| The Effect on Manufactures and Retailers | 7 |
| Distribution | 8 |
| Competitive Structure | 8 |
| Advertising | 9 |
| The Consumer | 9 |
| Market Forecasts | 10 |
| 3. Products and | |
| Services | 11 |
| Products | 11 |
| Books and Stationery | 11 |
| Clothing | 11 |
| Cosmetics and Toiletries | 12 |
| DIY | 13 |
| Electrical Goods | 13 |
| Garden Equipment | 13 |
| Holidays | 14 |
| Home Entertainment | 14 |
| Hosiery and Lingerie | 14 |
| Kitchenware | 14 |
| Linens | 15 |
| Mobile Phones | 15 |
| Petrol | 15 |
| Pharmaceuticals, Vitamins and Supplements | 15 |
| Toys and Novelties | 16 |
| Services | 17 |
| Air Miles | 17 |
| Beauty Shops | 17 |
| Catering | 17 |
| Coffee Shops and | |
| Restaurants | 17 |
| Take-Aways | 17 |
| Clubs | 18 |
| Financial Services | 18 |
| Banking | 18 |
| Sainsbury’s Bank PLC | 18 |
| Tesco Personal | |
| Finance Ltd | 18 |
| Insurance | 19 |
| Sainsbury’s Insurance | 19 |
| Tesco Insurance | 19 |
| ASDA Insurance | 20 |
| Home Shopping | 20 |
| Internet Access | 20 |
| Mother-and-Baby | |
| Facilities and Crèches | 20 |
| Photoshops | 20 |
| Recycling Facilities | 20 |
| Telephone Services | 21 |
| Utilities | 21 |
| 4. Market Size | 22 |
| Total Retail Sales Values | 22 |
| Table 1: Consumer Expenditure on Selected Products by Value at Current Prices | |
| (£m), 1999 and 2000 | 22 |
| Table 2: Consumer Expenditure on Selected Products by Value at Current Prices | |
| (£m and %), Third Quarter 2000 and 2001 | 23 |
| Figure 1: Consumer Expenditure on Selected Products by Value at Current Prices | |
| (£m and %), Third Quarter 2000 and 2001 | 24 |
| Non-food Sales Value Attributable to Grocery Multiples | 25 |
| Cleaning Products | 25 |
| Clothing and Footwear | 25 |
| Health-and-Beauty | |
| Products | 25 |
| Top Health-and-Beauty Markets by Value | 25 |
| Table 3: Top Health-and-Beauty Markets in Multiple Grocers by Value | |
| (£m and %), 1999 and 2000 | 26 |
| Figure 2: Top Health-and-Beauty Markets in Multiple Grocers by Value | |
| (£m and %), 1999 and 2000 | 27 |
| Top Health-and-Beauty Markets by Growth | 27 |
| Table 4: Health-and-Beauty Markets in Multiple Grocers Showing Strongest Growth (£m and %), 1999 and 2000 | 28 |
| Figure 3: Health-and-Beauty Markets in Multiple Grocers Showing Strongest Growth (£m and %), 1999 and 2000 | 29 |
| Stationery | 29 |
| 5. Current Issues | 30 |
| Consumer issues | 30 |
| Lifestyles | 30 |
| Number of Households | 30 |
| Purchasing Profiles | 30 |
| By Social Grade | 30 |
| Table 5: Purchasing Profile by Supermarket by Social Grade (index where base=all households=100), 1999 | 31 |
| By Age | 31 |
| Home Shopping | 31 |
| Sunday Shopping | 32 |
| Table 6: Goods Bought on a Sunday in the Past 3 Months (% of adults shopping), 2000 | 32 |
| Figure 4: Goods Bought on a Sunday in the Past 3 Months (% of adults shopping), 2000 | 33 |
| Average Weekly | |
| Expenditure | 33 |
| Table 7: Average Weekly Expenditure on Different Non-Food Products at Large Supermarket Chains and Other Outlets (£ per household per week), 1999/2000 | 33 |
| Consumer Associations | 35 |
| The National Consumer Council | 35 |
| The Consumer | |
| Association | 35 |
| supplier issues | 35 |
| Home Delivery | 35 |
| Grey-Market Imports | 36 |
| Opening Hours | 37 |
| Resale Price | |
| Maintenance | 37 |
| National Minimum | |
| Wage | 38 |
| Loyalty Schemes | 38 |
| Investigation into Profiteering | 38 |
| Planning Restrictions | 39 |
| 6. An International Perspective | 40 |
| The European View | 40 |
| 7. PEST Analysis | 41 |
| Political Factors | 41 |
| Adopting the Euro | 41 |
| The Minimum Wage | 41 |
| Economic Factors | 41 |
| Disposable Income | 41 |
| Personal Finance | 41 |
| Trading in Euros | 42 |
| Social Factors | 42 |
| Lifestyles | 42 |
| Fair Trade | 42 |
| Community Initiatives and Charity Support | 42 |
| Technological Factors | 43 |
| Self-Scanning | 43 |
| Electronic Point-of-Sale | 43 |
| 8. Consumer Dynamics | 44 |
| National Opinion Poll | 44 |
| Table 8: Purchase of Non-Food and Services from Supermarkets (% of respondents), 2002 | 44 |
| Usage of Cash-Back | |
| Service and the Purchase of Clothing | 46 |
| Table 9: Usage of Cash-Back Service and Purchase of Clothing (% of respondents), 2002 | 46 |
| Cashback | 48 |
| Purchase of Clothing | 48 |
| Electrical Goods and Prescription Dispensing | 49 |
| Table 10: Purchase of Electrical Goods and | |
| Use of Prescription Dispensing (% of respondents), 2002 | 49 |
| Purchase of Electrical | |
| Goods | 51 |
| Prescriptions | 51 |
| Concentrating on Food/ | |
| Non-Agreement | 51 |
| Supermarkets Should Concentrate on Food | 51 |
| Those Agreeing with | |
| None of the Statements | 51 |
| Table 11: Those Agreeing that Supermarkets Should Concentrate on Food and Those Who Do Not Agree With Any of The Statements (% of respondents), 2002 | 52 |
| 9. Company Profiles | 54 |
| Major players | 54 |
| Tesco PLC | 54 |
| Table 12: Financial Results for Tesco PLC (£m and %), Years Ending 26th February 2000 | |
| and 24th February | |
| 2001 | 55 |
| J Sainsbury PLC | 56 |
| Table 13: Financial Results for J Sainsbury PLC (£m and %),Years Ending 1st April 2000 and 31st March 2001 | 57 |
| ASDA Group Ltd | 57 |
| Table 14: Financial | |
| Results for ASDA Group Ltd (£m), Years Ending 1st May 1999 and 7th January 2000 | 58 |
| Safeway PLC | 59 |
| Table 15: Financial Results for Safeway PLC | |
| (£m and %), Years Ending 1st April 2000 and 31st March 2001 | 60 |
| Wm. Morrison | |
| Supermarkets PLC | 60 |
| Table 16: Financial Results for Wm. Morrison Supermarkets PLC (£m and %), Years Ending 31st January 2000 and 4th February 2001 | 60 |
| Somerfield PLC | 61 |
| Table 17: Financial Results for Somerfield PLC (£m and %), Years Ending 29th April 2000 and 28th April 2001 | 61 |
| Own-label Value Shares | 61 |
| Household Goods | 62 |
| Table 18: Own-Label Value Share of Household Goods in Selected Supermarkets (%), 1999 | 62 |
| Figure 5: Own-Label Value Share of Household Goods in Selected Supermarkets (%), 1999 | 63 |
| Alcohol | 63 |
| Table 19: Own-Label Value Share of Alcohol in Selected Supermarkets (%), 1999 | 64 |
| Figure 6: Own-Label Value Share of Alcohol in Selected Supermarkets (%), 1999 | 64 |
| Petfood/Care | 65 |
| Table 20: Own-Label Value Share of Petfood/Care Products in Selected Supermarkets | |
| (%), 1999 | 65 |
| Figure 7: Own-Label Value Share of Petfood/Care Products in Selected Supermarkets | |
| (%), 1999 | 66 |
| Toiletries | 66 |
| Table 21: Own-Label Value Share of Toiletries in Selected Supermarkets (%), 1999 | 67 |
| Figure 8: Own-Label Value Share of Toiletries in Selected Supermarkets (%), 1999 | 67 |
| Company Advertising | 68 |
| Expenditure | 68 |
| Table 22: Main Media Advertising Expenditure by Selected Major Supermarkets | |
| (£000), Years to December 2000 and 2001 | 68 |
| Recent Activity | 68 |
| Advertising Standards Authority | 68 |
| Air Miles | 69 |
| ASDA Group Ltd | 69 |
| Character Licensing | 69 |
| GMTV and Tesco | 69 |
| J Sainsbury PLC | 69 |
| Safeway PLC | 70 |
| Tesco PLC | 70 |
| Two-for-One Promotions | 70 |
| Distribution | 71 |
| Supermarkets’ Estimated Share of Selected Non-Food Items | 71 |
| Table 23: Supermarkets’ Share of the Distribution of Certain Non-Food Items | |
| by Value (%), 2001 | 71 |
| 10. The Future | 72 |
| Expansion | 72 |
| Turnover | 72 |
| Demographics and Economic Climate | 72 |
| Growth Areas | 73 |
| 11. Further Sources | 75 |
| Associations | 75 |
| Publications | 75 |
| General Sources | 76 |
| Bonnier Information | |
| Sources | 77 |
| Government and Official Sources | 78 |
| Other Sources | 79 |
| Key Note Research | 81 |
| The Key Note Range of Reports | 82 |
Text © 2002 Key Note
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Last updated by Amanda Porteous 2002
