Asda is gearing up to launch its own answer to eBay in a bid to shift residual non-food stock to the grey market, The Grocer has learnt.

Executive development director Doug Gurr is heading up plans to launch A-Bay an e-auction website that will offer excess general merchandise from seasonal and range changes such as clothing, electricals and homeware to the discounter trade.

Asda believes the scheme will free up space to store more current stock and deliver cost savings. It currently sends residual stock back to manufacturers or offers it to shoppers at a discounted price but will be able to generate more profits by selling it on directly to the grey market, said one discounter source.

The plan came from the winners of Asda's third Dragons' Den-style in-house competition, which invited staff to pitch suggestions on how to run the retailer better and wowed judges Gurr, CEO Andy Bond, CFO Judith McKenna and TV dragon Peter Jones.

Shore Capital analyst Clive Black described the A-Bay tag as "highly innovative". "As as an operational mechanism the idea is novel and should help with orderly stock clearance and so working capital management on a very efficient cost base," he said.

However, the plans have received a mixed reaction from the discount sector.

One chief executive is not convinced the website will work. "Our buyers have little inclination to be sitting in front of PCs watching an auction. The more effective way to sell these overstocks is by developing trading relationships with suitable partners."

Another discounter source said A-Bay would be better received with his suppliers than himself, because they would be more inclined to buy the stock in bulk, split it up and then sell it on to retailers like his. "Asda is in danger of watering down its brand. And the move could deter shoppers from buying general merchandise at Asda if they can get it cheaper elsewhere," he said.

A fourth source claimed his chain would only be interested in the site if it offered large volumes. "I would imagine excess general merchandise is a big problem for Asda so this could be an effective way to solve it. The site is likely to offer items such as shoes of very small and large sizes, as well as weird-coloured shirts it couldn't sell."

An Asda spokeswoman would not reveal when the site would go live.

Residual stock has become a major focus for retailers recently. In November, Tesco launched a similar service to A-Bay, offering consumers refurbished electrical lines such as Sony, Phillips and Samsung, at bargain prices on e-Bay. The UK's first online residual stock marketplace for the industry, Emarket, also launched last year.