The sudden departure of managing director Chris Onslow from Asda’s George Davies Partnership last week could signal a shift in the supermarket’s clothing strategy.
Asda says he left for unspecified “personal reasons” (MW March 26). But his departure comes as the chain struggles to keep the George range in line with its own mass-market appeal. Some reports suggest the clothes may have become a little too trendy for Asda’s customers.
The success of the chain’s clothing range is key to Asda’s “Breakout” project, first launched in 1995, the year Asda paid George Davies 16m for his share of the George Davies Partnership.
Breakout is the second stage of Asda’s recovery programme. First came the three-year Renewal programme, which successfully brought the chain out of the doldrums. Breakout aims to make Asda different from its rivals, Tesco, Sainsbury’s and Safeway, through offering non-food products, such as George clothing.
But the departure of George’s second-in-command is a setback for the plans.
Onslow was hired as George’s first marketing director last August. But there are reports that under the direction of chairman George Davies and Onslow, who was promoted to managing director in January, the label has drifted into a narrower market than the mass-market appeal Asda would wish.
Observers report that there has been a disagreement among George’s managers and Asda over its merchandising – the way the range is displayed – and over recent sales figures.
City analysts are concerned that the brand’s positioning has become closer to that of Next, the chain Davies set up in 1982, than that of Marks & Spencer. This cuts across the ambition Asda has for George – to make it Britain’s number-two family clothier after M&S.
Imitating Next does not seem a wise move at the moment, after Next warned last week that sales in its stores in the first two months of this year fell by 1.5 per cent, despite a 12 per cent increase in selling space, and that profits would be damaged.
Next chief executive David Jones explains that the retail chain bought too much stock last autumn, and was left with an excess it could only sell at a discount price. Next’s buyers then over-reacted and failed to order enough stock for what have proved to be popular lines in the current season. The retailer stocked less of the perennial classics its customers love and moved towards a trendier, younger range of styles.
One analyst says: “The core problem with the George range is that it is like Next. The M&S range sells to everyone regardless of age or style and, as far as I know, Next does not sell to grannies.”
There have been reports of a fall in sales of the new spring collection of George clothing, which some say show problems with the range. Asda will not release sales figures until June. Steven Cain, Asda group sales and marketing director, refuses to comment directly on the reports, but says intriguingly: “Never judge a year by a few weeks.”
The George children’s range is said to be doing well, but the women’s and men’s lines are de-signed to appeal to younger people. Cain denies there has been such as shift. He says: “George will always have the right colours at the right price. We’re not Red or Dead and we’re not M&S.”
The George range recorded sales growth of 32 per cent between April and November last year. When pressed on reports of declining sales, Cain says: “The George range is still achieving outstanding like-for-like sales growth” – a comment which does not rule out a fall in the rate of growth.
Next and George are not alone with their problems. Any retailer which enters the fashion arena is entering an unpredictable market. The British economy may be booming, but poor figures and profit warnings have dominated the fashion world over the past few months. Harvey Nichols’ winter sale was one of its biggest to date because autumn trading had hit a slump – in part owing to the unusually warm weather.
The perils of supermarket flirtations with clothing were underlined when Sainsbury’s pulled out of clothing in 1996, despite the higher margins clothes offer compared with food.
But to Asda, the non-food arena is essential: it provides a major incentive to enter the store; once there the shoppers may choose to buy food. Richard Hyman, chairman of Verdict Research, says: “Non-food is a key selling point for Asda. The chain’s food is not as good as Tesco’s and Sainsbury’s in terms of depth and breadth of range, but it’s a better all-round retailer.
“George’s most important role is as a point of difference. Asda is the only food retailer with a credible clothing offer.”
The label represents an estimated seven per cent of the supermarket’s sales, which in 1997 were close to 7bn. If all goes well, sales for George are tipped to reach 450m in 1998. One analyst says Asda aims to boost George sales to 1bn within three years.
According to Cain, in the new 45,000 square foot stores, 8,000 square feet goes to the clothing range – almost 18 per cent of the shopfloor.
“In 1997 we spent about 3m on advertising George,” says Cain. “It was the first time we really invested in a marketing campaign for the brand. It worked well and we will be doing more TV marketing in the next year. We will continue to drive more space into clothing.”
Asda says it has not yet decided whether to replace Onslow. And some analysts question whether Davies himself still has a role.
He is spending time working with football clubs, including Newcastle United, on merchandising a clothing range. His George contract comes up for renewal next October, and some wonder if he will continue. Maybe it would be a chance to move control of George into Asda’s Leeds head office.
Asda may not be able to carry out its Breakout plans if the George range, so important to its efforts to be different to its grocery rivals, follows the path of Davies’ old company Next. The coming months will determine whether the George range can stay true to the demands of Asda’s customers – the “working people” of Britain.