British consumers love their supermarkets – but not only for food

More than 62% of all British shoppers regularly use supermarkets to buy non-food items, collectively spending over £19.7bn (about R319bn). These numbers have risen sharply compared to five years ago when fewer than half shopped at supermarkets for non-food items.

Tightening their grip

Over the past five years, the number of consumers regularly using supermarkets for non-food has risen dramatically. Nowadays, almost two out of every three shoppers in the UK claim to use grocers for items other than food, up from 45% of consumers just five years ago. The figures demonstrate the extent to which the supermarkets have tightened their grip on the £177bn (about R2850bn) UK non-food market of which they now take a share of £19.7bn (About R319bn) or 11%. (See table below, showing the percentage of all shoppers who regularly use supermarkets for certain non-food categories in 2005, 2008 and the percentage point growth over that period.)

On a sector level, supermarket dominance is no less impressive. A fifth of UK consumers regularly buy clothing, homewares and music and video at grocers, while just under half of consumers use the grocers for personal care products.

“What the grocers offer is convenience with very competitive prices”, says Neil Saunders, Verdict's Director of Consulting. “For the time-pressed, cost-conscious consumer it is a great advantage to be able to pick up good priced clothing or electrical items at the same time as doing a food shop.”

Squeeze on the specialists

The growth of the grocers has undoubtedly piled on the pressure for traditional specialist retailers. The grocers' growth rates in most non-food categories has been faster than the growth of the market as whole, meaning they have taken market share away from other players.

As an example of their dominance, in terms of regular customer share, Asda is the UK's fifth largest clothing retailer while Tesco is the ninth; both players now have more regular clothing customers than well-established chains like Bhs, Gap and H&M. Meanwhile, in personal care, all of the big four grocers (Tesco, Sainsbury's, Asda and Morrisons) have larger market shares than health and beauty specialist Superdrug.

“Almost everyone has to go grocery shopping and that means the grocers have a huge base of customers who regularly visit their stores”, says Saunders. “That's an enormous advantage because it allows them to easily put non-food ranges in front of those customers.”

However, the research stresses that the grocers' success in non-food is much more than just opportunistic selling. While there may be an element of opportunism, what most supermarkets are doing is much more advanced: many actively understand what their consumers want and tailor their offers accordingly. In some cases, they even attempt to lead and create fashion trends, especially in clothing.

Although the entry of the grocers into many non-food markets has created pressures for other players, Verdict's research concludes that the result has been a better deal for the consumer. “It is easy to knock the big grocers” says Saunders “but in the case of non-food they have acted as consumer champions: they have increased competition which has helped keep prices down across the board.”

You ain't seen nothing yet!

Although the grocers have experienced rapid growth in non-food over the past five years, Verdict believes their influence will only increase over the next five. By 2012, Verdict forecasts that, collectively, grocers' sales of non-food could be worth £24.4bn (about R393bn) – 24% higher than currently.

Two key things will help drive their growth. First, the premiumisation of their offer, which will see supermarkets selling a greater range of higher priced merchandise: this will help them attract a wider spread of consumers and allow them to take more business from specialist players. Second, the growth of the internet as a sales channel for non-food items: grocers are actively involved in this space and, because of their comprehensive delivery networks, could leverage an advantage over smaller specialist players who can find it difficult to accommodate shoppers' delivery requirements.

“Today's supermarkets are no longer simple grocers,” says Neil Saunders. “They are cathedrals of consumption, the department stores of the modern age. We expect them to build on this position over the next few years and that will certainly make life difficult for other specialist players.”

Source: Verdict Consulting