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Grocery Multiples: Reconfiguring the Non-food Offer - UK - October 2018

“Over the past five years pressure has been placed on the supermarket sector in the UK, with the rise of discounters, online and convenience stores taking away a traditional dependence on the larger store format. As such the traditional big four have had to readjust the formats of their larger stores, integrating new non-food and service-based innovations in an effort to drive patronage”
– Nick Carroll , Senior Retail Analyst

This report looks at the following areas:

  • Concessionary partners: does the mini-mall future stack up?
  • What Asda and Sainsbury’s merger means for general merchandise

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • The market
            • Real incomes have begun to grow once more in 2018
              • Figure 1: Real incomes: CPIH versus average weekly earnings (excluding bonuses), Jan 2015-Aug 2018
            • Supermarket sector continues to lose share
              • Figure 2: Estimated breakdown of sector sales, by channel, 2012-18
            • Thanks to Argos, Sainsbury’s is the largest player in non-foods
              • Figure 3: Estimated total retail revenue of the big four, by food and non-food split, 2017/18
            • Companies and brands
              • Tesco sees growth return to its largest stores
                • Figure 4: Tesco, like-for-like performance (ex VAT, ex fuel) by format, 2016/17-2018/19
              • Sainsbury’s aims to add a department store feel to its stores
                • Figure 5: Sainsbury’s new beauty offering, October 2018
              • George: the jewel among the supermarket clothing brands
                • Figure 6: George within an Asda superstore, December 2017
              • Less need to redistribute space for Morrisons but Nutmeg is ripe for expansion
                • The consumer
                  • Most combine a main shop with a top-up, and most spend the most in supermarkets
                    • Figure 7: Household grocery buying behaviours, August/September 2015-18
                  • More than four in five purchase non-foods in-store at supermarkets
                    • Figure 8: Non-food products purchased in-store and online in the past 12 months, August 2018
                  • George the most purchased from supermarket clothing brand
                    • Figure 9: Supermarket brand shopped with in-store or online in the past 12 months, by categories of clothing, August 2018
                  • Three quarters have used a service in-store at supermarkets in the past year
                    • Figure 10: Services used in supermarkets in the past year, August 2018
                  • Over half say they buy non-foods on impulse
                    • Figure 11: Behaviours related to supermarkets and non-food purchasing, August 2018
                  • Online has lessened the need to buy non-foods in-store for many
                    • Figure 12: Attitudes towards non-foods and services in supermarkets, August 2018
                  • What we think
                  • Issues and Insights

                    • Concessionary partners: does the mini-mall future stack up?
                      • The facts
                        • The implications
                          • What Asda and Sainsbury’s merger means for general merchandise
                            • The facts
                              • The implications
                              • The Market – What You Need to Know

                                • Inflation soars in 2017 but has begun to ease, leading to growing real incomes
                                  • Confidence improving in 2018 but Brexit has the potential to dampen it
                                    • Supermarket sector continues to lose share
                                      • Thanks to Argos, Sainsbury’s is the largest player in non-foods
                                      • Market Drivers

                                        • Inflation soars in 2017 but has begun to ease
                                          • Figure 13: Inflation: annual % change in core changes, 2015-Aug 2018
                                        • High inflation drops real incomes into decline in 2017, but 2018 has brought growth once more
                                          • Figure 14: Real incomes: CPIH versus average weekly earnings (excluding bonuses), Jan 2015-Aug 2018
                                        • Confidence improving in 2018, but Brexit doubts hit in August
                                          • Figure 15: Mintel’s Financial Confidence Tracker, Jan 2016-Sep 2018
                                        • Retail sales maintain growth despite uncertainty in the market
                                          • Figure 16: Value food and non-food retail sales growth, non-seasonally adjusted, Jan 2017-Aug 2018
                                        • Online continues to grow its share of the market
                                          • Figure 17: Online retailing – Share of all retail sales on a monthly and annual basis, 2012-18
                                      • Market Size and Segmentation

                                        • Supermarket sector continues to lose share
                                          • Figure 18: Estimated breakdown of sector sales, by channel, 2012-18
                                        • The big four grocery multiples are growing once more
                                          • Figure 19: The Big Four: Total UK revenues (inc VAT), 2014/15-2017/18
                                          • Figure 20: Total estimated non-retail revenues of the big four, 2014/15-2017/18
                                        • Non-foods: Argos acquisition makes Sainsbury’s the largest player
                                            • Figure 21: Estimated total retail revenue of the big four, by food and non-food split, 2017/18
                                            • Figure 22: Estimated breakdown of grocery multiples’ non-food revenues, 2017/18
                                        • The Consumer – What You Need to Know

                                          • Most combine a main shop with a top-up, and majority spend the most in supermarkets
                                            • More than four in five purchase non-foods in-store at supermarkets
                                              • George the most purchased supermarket clothing brand
                                                • Three quarters have used a service in-store at supermarkets in the past year
                                                  • Over half say they buy non-foods on impulse
                                                    • Online has reduced the need to buy non-foods in-store for many
                                                    • How They Shop for Groceries

                                                        • Most combine a main shop with a top-up …
                                                          • Figure 23: Household grocery buying behaviours, August/September 2015-18
                                                        • Growth in use of discounters and online has led to less reliance on supermarkets
                                                          • Figure 24: Store format where the most is spent in a typical month, August 2018
                                                        • Tesco is by far the most popular retailer
                                                          • Figure 25: Retailers where households spend the most and where they also shop in a typical month, August 2018
                                                      • Non-foods Purchased at Supermarkets

                                                        • More than four in five purchased non-foods in-store at supermarkets
                                                          • Figure 26: Non-foods purchased in-store or online in the past 12 months, August 2018
                                                        • A third think supermarkets should carry a wider range of non-foods
                                                            • Figure 27: Attitudes towards non-foods in supermarkets, August 2018
                                                          • Most buy non-foods in-store at supermarkets
                                                            • Figure 28: Non-food products purchased in-store and online in the past 12 months, August 2018
                                                          • Younger shoppers more likely to buy non-foods via supermarkets, in-store or online
                                                            • Figure 29: Any non-food purchasing in supermarkets in-store or online, by age, August 2018
                                                            • Figure 30: In-store purchasing of non-foods, by age, August 2018
                                                            • Figure 31: Online purchasing of non-foods, by age, August 2018
                                                          • Morrisons shoppers most likely to buy in-store, but online is lagging
                                                            • Figure 32: Total online and in-store purchasing, by retailer where the most is spent in a typical month, August 2018
                                                        • Supermarket Clothing Brands

                                                          • Womenswear most popular to purchase from the grocery multiples
                                                            • Figure 33: Categories of clothing purchased from supermarket retailers in-store or online in the past year, August 2018
                                                          • Supermarket clothing brands seen as good value, but not necessarily a footfall driver
                                                              • Figure 34: Attitudes towards supermarket clothing brands, August 2018
                                                            • George the most shopped from brand
                                                              • Figure 35: Supermarket brand shopped with in-store or online in the past 12 months, by categories of clothing, August 2018
                                                            • George performing well with young families
                                                              • Figure 36: Supermarket brand shopped with in-store or online in the past 12 months, by categories of clothing and age, August 2018
                                                              • Figure 37: Supermarket childrenswear purchasing, by parental status and age of children, August 2018
                                                          • Services in Supermarkets

                                                            • Three quarters have used an in-store service in the past year
                                                                • Figure 38: Services used in supermarkets in the past year, August 2018
                                                              • Repertoire of services used
                                                                • Figure 39: Repertoire of services used in the past 12 months, August 2018
                                                              • Families more dependent on supermarket services
                                                                • Figure 40: Use of in-store services at supermarkets, by parental status, August 2018
                                                              • Demand for supermarkets to increase their service offering
                                                                • Figure 41: Attitudes towards expansion of services in-store, August 2018
                                                              • Post Office most desired service
                                                                  • Figure 42: Services consumers would like to see more of in supermarkets, August 2018
                                                              • Non-food Purchasing Behaviours in Supermarkets

                                                                • Supermarket visits are part of the routine for most
                                                                  • Figure 43: Behaviours related to supermarkets and non-food purchasing, August 2018
                                                                • Younger consumers say they are more influenced by non-food range
                                                                    • Figure 44: ‘Yes’ responses to behaviours related to supermarkets and non-food purchasing, by age, August 2018
                                                                • The Impact of Online on Supermarkets

                                                                  • The impact of online
                                                                      • Figure 45: Attitudes towards justification of supermarket visitation, August 2018
                                                                    • A majority say they have price-checked online whilst in-store
                                                                      • Figure 46: Behaviours related to supermarkets, non-food purchasing and online, August 2018
                                                                    • Younger consumers more likely to price-check in-store
                                                                        • Figure 47: ’Yes’ responses to behaviours related to supermarkets, non-food purchasing and online, by age August 2018
                                                                    • Leading Retailers – What You Need to Know

                                                                      • Tesco ups its partnerships
                                                                        • George the jewel in the Asda crown
                                                                          • Nutmeg goes on an expansion drive
                                                                            • Argos makes Sainsbury’s the largest non-food player
                                                                              • Innovation away from home
                                                                              • Tesco

                                                                                • The store estate
                                                                                  • Figure 48: Tesco key financials, 2017/18
                                                                                • The return of the superstore?
                                                                                  • Figure 49: Tesco, like-for-like performance (ex VAT, ex fuel) by format, 2016/17-2018/19
                                                                                • Partnering with potential rivals to drive patronage
                                                                                  • Figure 50: Next in Tesco Extra, October 2018
                                                                                • The curious case of Tesco Direct
                                                                                  • What we think
                                                                                  • Asda

                                                                                    • The store estate
                                                                                      • Figure 51: Asda Living store, 2017
                                                                                      • Figure 52: Asda key financials, 2017/18
                                                                                    • A multi-channel, collection-driven offer
                                                                                      • Figure 53: Asda Parcel tower Trafford Park, January 2018
                                                                                    • George, the jewel in the non-food offering
                                                                                      • Figure 54: George within an Asda superstore, December 2017
                                                                                      • Figure 55: George Home range
                                                                                    • Inviting others to the party
                                                                                      • Figure 56: Subway in Asda Supercentre, October 2018
                                                                                    • What we think
                                                                                    • Morrisons

                                                                                      • The store estate
                                                                                        • Figure 57: Morrisons key financials, 2017/18
                                                                                      • Amazon: partner, or elephant in the room?
                                                                                        • Figure 58: Amazon lockers at Morrisons, October 2018
                                                                                      • Nutmeg: ripe for expansion
                                                                                        • Figure 59: Nutmeg in-store at Morrisons, October 2018
                                                                                      • Bringing the party
                                                                                        • Figure 60: Morrisons Party shop, October 2018
                                                                                      • A limited approach to partnerships
                                                                                        • What we think
                                                                                        • Sainsbury’s

                                                                                          • The store estate
                                                                                            • Figure 61: Sainsbury’s key financials, 2017/18
                                                                                          • The integration of Argos
                                                                                            • Figure 62: Argos concession within Sainsbury’s, May 2017
                                                                                          • Sainsbury’s + Asda: what does it mean for non-foods?
                                                                                            • Beauty getting the department store feel
                                                                                              • Figure 63: Sainsbury’s new beauty offering, October 2018
                                                                                              • Figure 64: The Fragrance Shop in Sainsbury’s, October 2018
                                                                                            • Habitat lives on
                                                                                              • Figure 65: Habitat store within Sainsbury’s, May 2017
                                                                                            • What we think
                                                                                            • Innovation From Across the Globe

                                                                                              • Expanding into new categories to find new business
                                                                                                • In-store environments that differentiate from competitors
                                                                                                  • Innovative instore food & drink services
                                                                                                    • Supermarket pop-up concepts
                                                                                                    • Advertising and Marketing Activity

                                                                                                      • Leading supermarkets’ food and non-food advertising
                                                                                                        • Total advertising spend down for the third consecutive year in 2017
                                                                                                          • Figure 66: Combined recorded above-the-line, online display and direct mail total advertising expenditure by Asda Stores, Sainsbury’s Supermarkets, Tesco, Wm Morrison Supermarkets and Waitrose, 2013-17
                                                                                                        • Food and drink advertising expenditure bigger than non-food advertising spend
                                                                                                          • Figure 67: Combined recorded above-the-line, online display and direct mail total advertising expenditure by Asda Stores, Sainsbury’s Supermarkets, Tesco, Wm Morrison Supermarkets and Waitrose, split by food and drink advertising and non-food advertising, 2013-17
                                                                                                        • Tesco food & drink advertising vs non-food advertising
                                                                                                          • Figure 68: Recorded above-the-line, online display and direct mail total advertising expenditure by Tesco, split by food & drink advertising and non-food advertising, 2013-17
                                                                                                        • Asda food & drink advertising vs non-food advertising
                                                                                                          • Figure 69: Recorded above-the-line, online display and direct mail total advertising expenditure by Asda Stores, split by food & drink advertising and non-food advertising, 2013-17
                                                                                                        • Sainsbury’s food & drink advertising vs non-food advertising
                                                                                                          • Figure 70: Recorded above-the-line, online display and direct mail total advertising expenditure by Sainsburys Supermarkets, split by food & drink advertising and non-food advertising, 2013-17
                                                                                                        • Wm Morrisons food & drink advertising vs non-food advertising
                                                                                                          • Figure 71: Recorded above-the-line, online display and direct mail total advertising expenditure by Wm Morrison Supermarkets, split by food & drink advertising and non-food advertising, 2013-17
                                                                                                        • Waitrose food & drink advertising vs non-food advertising
                                                                                                          • Figure 72: Recorded above-the-line, online display and direct mail total advertising expenditure by Waitrose, split by food & drink advertising and non-food advertising, 2013-17
                                                                                                        • Non-food advertising as a percentage of total advertising expenditure
                                                                                                          • Figure 73: Recorded above-the-line, online display and direct mail total advertising expenditure by Asda Stores, Sainsbury’s Supermarkets, Tesco, Wm Morrison Supermarkets and Waitrose, Non-food advertising as percentage of total advertising, 2013-17
                                                                                                        • Selected non-food category advertising spend in 2017
                                                                                                          • Figure 74: Combined recorded above-the-line, online display and direct mail total advertising expenditure by Asda Stores, Sainsbury’s Supermarkets, Tesco, Wm Morrison Supermarkets and Waitrose, by selected non-food product category, 2017
                                                                                                        • Nielsen Ad Intel coverage
                                                                                                        • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                          • Data sources
                                                                                                            • Consumer research methodology
                                                                                                              • Abbreviations

                                                                                                              Grocery Multiples: Reconfiguring the Non-food Offer - UK - October 2018

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