ASDA advance stirs United Kingdom retail

DSN Retailing Today,  Dec 13, 2004  by Mike Duff

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Retailing has been gaining momentum in the United Kingdom, although more slowly of late than it was a couple of years ago. Competition is tough and mergers and acquisitions frequent, much of it generated by the growth initiatives of Wal-Mart's Asda division. William Morrison supermarkets completed its acquisition of Safeway U.K. this year, and J. Sainsbury, which has suffered declining sales and profits in the squeeze, is considered a potential takeover candidate.

Asda's advance hasn't been a cakewalk, though. It has been strongly contested, particularly by Tesco, which is winning a worldwide reputation as one of the few retailers who can stay in the ring with Wal-Mart.

In September retail sales in the United Kingdom gained 2% on a same-store basis, according to the British Retail Consortium, a trade organization. But, the three-month same-store growth rate trend fell from 1.7% in August to 1.5% through September, and from 4.2% to 4.1% for total sales. For 2003, U.K. retail sales were about $458 billion.

On the whole, sales and comps have increased in the United Kingdom, with the rate gaining from a low mark in 1997 and peaking in 2002. Since then, the trend has been for smaller--though still positive--monthly sales and comp gains.

While it continues developing variations on its food-based Asda stores, Wal-Mart has been trying out new formats in the United Kingdom, a market where retailers of all sorts seem to update store designations on a regular basis.

The retailer has opened several supercenters in the country. In 2003, it converted existing Asda stores in the towns of Wigan and Sheffield to supercenter formats utilizing Asda/Wal-Mart dual branding--but also has been testing fresh-concepts. For example, it has built on its successful George apparel line to develop an recently launch George stores.

The stand-alone George stores will be a growth vehicle for Wal-Mart. According to one published report, Asda plans eight more stand-alone George stores in 2005. The first five George stores have been in a mix of town and country locations, and Asda continues to review how different variations perform under different conditions.

In May, Asda announced that it would establish a new clothing organization--George Global--to help drive its George brand to new markets around the world. The group, lead by Asda general merchandise trading director Andy Bond, will be based initially at the existing George home office in Lutterworth, Leicestershire, and will take responsibility for all product design and development. George Global gradually will become involved in the manufacturing and sourcing of George products for all of Wal-Mart.

Beyond George, Wal-Mart also has crafted a "general store" format that debuted in 3,845 square meters at Walsall's Crown Wharf Retail Park, a West Midlands retail center. The format includes toys, home furnishings, jewelry, health and beauty aids, electrical goods and George clothing, all at prices set to match those found at Asda stores. The idea, Wal-Mart has stated, is to test its growing general merchandise assortment outside of the Asda supermarket setting.

A central development in what Asda is doing in the United Kingdom regards general merchandise. The company already operates supercenters, including units using the Wal-Mart name, but Asda is increasing its participation in non-foods in several ways. For one, it has added an upscaie private label home goods program by introducing general merchandise under a brand developed in food, Extra Special.

Dominic Burch, an Asda spokesman, said the label wasn't appropriate for the trademark George apparel line--George Collection is the step-up brand there--but seemed to be a better fit with categories such as domestics. In the future, Burch said, Asda general merchandise will be developed to better coordinate between other categories, including food.

Still, the highest-profile developments in general merchandise are the rollout of George and Asda Living stores. Six George units are now operating, the latest opening in Manchester. More recent openings have updated merchandising compared to the original store in Leeds. Wood veneer floors, lower fixtures, clearer sight lines, brighter lighting and a smattering of home, toy and seasonal items are all part of the update.

Asda Living, opened a few months in Walsall, near Birmingham, boasts the same full-range selection of George products offered at Asda supercenters and George stores, but with an equal presentation of general merchandise. Burch noted that the two stores are being used to determine what mix of George and Asda general merchandise, with both private label and national brand goods, can work in a stand-alone format--formats that can go where supercenters can't.

George is the more mature concept with six stores compared to one Asda Living. Ten more Georges are planned in the United Kingdom next year. However, that doesn't mean that Asda Living should be counted out. Asda will take some time to review performance before making future plans for the latest format, but store manager Mark Ryles said Asda Living has impressed so far. "It has exceeded expectations," he said.