Supermarket electrification

The supermarket giants are moving into the territory traditionally occupied by department stores. A Spectra Marketing survey on the UK’s supermarkets shows that the strategy of providing consumers with an increasingly wide range of buying opportunities in a safe, clean and child-friendly environment is beginning to pay dividends.

Over the past five years, UK supermarkets’ non-food sales have grown by a massive 59 per cent, and recent predictions from Verdict Research suggest that turnover will grow by a further £7bn in the next five years.

As well as selling non-food goods, the big superstores now offer a mind-boggling array of services – photo-processing, dry cleaning, pharmacies, crèches, discounted petrol, restaurants, financial services and even health checks. Between 1996 and 2001, Asda, Morrisons, Safeway, Sainsbury’s and Tesco dedicated 4.9 million sq ft of additional store space to non-food items.

So which stores are having the most impact and in what categories? Spectra Marketing has identified those superstores that are leading the way when it comes to four of the newest non-food categories – large electrical goods, garden furniture, small electrical goods and bathroom accessories.

Asda is out in front in the electrical appliances market. Consumers are 13 per cent more likely than average to have bought a large appliance (TV, hi-fi, PC and so on) from Asda. Likewise, when it comes to small electrical goods such as toasters and kettles, consumers are nine per cent more likely than average to have chosen Asda for their purchase. The report also reveals that Tesco and the discount stores (including Aldi, Lidl and Netto) are making gains in this area, with consumers eight per cent and seven per cent more likely respectively to have bought a large electrical product at these stores.

Garden furniture is also a fast-growing category for superstores, and Morrisons leads the market – consumers are 30 per cent more likely than average to have bought a garden-related product at this store. Again, though, Asda does very well here – at 27 per cent above average.

When it comes to bathroom accessories, Marks & Spencer (M&S) is just out in front. M&S is certainly more readily associated with home furnishings than are the other superstores and consumers are 18 per cent more likely to buy extras for their bathroom here than at any competing store. Once again though, the report shows that Morrisons is a key challenger in this category – at 14 per cent.

Spectra Marketing says there is no doubt that supermarkets are starting to put the squeeze on some non-food stores. Their price-driven strategy means that other retailers will have to work hard to compete or find an alternative sales proposition that works.

Given the increasing role that supermarkets play in our daily lives, what is it that drives consumers to choose one store over another for their weekly grocery shop?

Asda is the runaway leader when the appeal of its non-food range is measured. Its customers are 124 per cent more likely than average to shop at the store because of the non-food range than are its competitors’ customers. Even more interesting is the fact that Asda’s non-food range is a much more powerful motivator than price, on which the company focuses so much advertising spend (although price is the second-highest motivator for Asda customers, it is not as far above average – 55 per cent – as is the lure of the non-food range). M&S customers also nominated the chain’s non-food range as a key motivator – here, customers are 39 per cent more likely than other consumers to do their grocery shopping for this reason.

Price is always a point of difference in the grocery market and, perhaps unsurprisingly, the discount stores are out in front when it comes to value appeal. Customers of Aldi, Lidl and Netto are 76 per cent more likely than average to shop where they do because of price, but competition is stiff and the discounters’ market share is already under pressure from several major players. Taylor Nelson Sofres recently reported a two per cent drop in the discount stores’ market share between 2000 and 2001, and the Spectra report reveals just how close the gap is in consumer perception. Kwik Save customers are 62 per cent more likely than average to have based their shopping decision on price, while the comparable figures for Asda and Morrisons are 55 per cent and 41 per cent respectively.

Customer service is a major factor in polarising the grocery market. Waitrose, M&S and – perhaps surprisingly – Iceland customers are 238 per cent, 120 per cent and 198 per cent respectively more likely than average to shop at those stores for this reason alone. However, customer service is not a significant attractive force at other major stores.

Non-food ranges will play an increased role in the strategic development of superstores. Already, supermarkets control some 44 per cent of the health and beauty market and have a 3.3 per cent market share in electricals. But just how great their potential reach is – and the consequent impact on the retail landscape in the UK – has yet to be seen.