Tis the season to be merry for Tesco and Asda whose superior non-food offers will give them the edge, says Sean McAllister
The City and retail analysts are predicting both Tesco and Asda will have a bumper Christmas. In fact both retailers could, albeit temporarily, steal customers from Sainsbury over the festive season.
The reason is simple - non-food. Research from both Deloitte and Verdict point to an increase in Christmas spending this year of 5.4% and 3.7% respectively. Deloitte consumer business partner Sharon Fraser says: “The recent interest rate rise does not appear to have dampened consumers’ spending. Moreover, whereas consumer confidence took a hit in the run-up to Christmas last year - as it became clear that international conflict abroad was likely - it is expected to be more supportive this year.”
However, the increase in consumer spending will not necessarily be on food - in fact Verdict predicts food and drink will be the slowest growing sector, up only 1.2%.
The real growth, according to Verdict, will come from non-food, in particular music and video, toys and games and electricals. Verdict’s Richard Hyman says non-food will therefore be an essential ingredient to grocers’ sales and profit growth at Christmas.
And some supermarkets are well placed to benefit from this Yuletide uplift in non-food spend. One factor, says KPMG’s head of retail Amanda Aldridge, is that supermarket floor space dedicated to non-food has significantly increased, giving better availability. Plus, she adds: “People have to shop for food. Therefore non-food departments in the supermarkets benefit from a high footfall.”
Another advantage, says Aldridge, is that supermarkets offer a greater ease of shop over their non-food rivals in the high street. She believes consumers may choose to buy bulky non-food items in supermarkets because of better parking facilities, which helps in carrying them to the car.
Tesco and Asda should be the main beneficiaries, says David Stoddart, analyst at Teather & Greenwood. He believes a combination of longer opening hours, convenience, lower prices and greater choice will significantly increase non-food sales. But he thinks it is too early for Sainsbury’s newly launched non-food offering to really capitalise on this trend.
Sainsbury may actually be the big loser over Christmas. The reason, says one analyst, is that it does not offer a one-stop Christmas shop like Tesco and Asda, which have become true Christmas destination stores.
But even Tesco and Asda could face a slower pace later next year. Deloitte’s Fraser says: “In the second quarter, consumers borrowed more, relative to their income, than at any point in time. Sooner or later, they must start paying off their debt and the retail environment will get tougher.”
The City and retail analysts are predicting both Tesco and Asda will have a bumper Christmas. In fact both retailers could, albeit temporarily, steal customers from Sainsbury over the festive season.
The reason is simple - non-food. Research from both Deloitte and Verdict point to an increase in Christmas spending this year of 5.4% and 3.7% respectively. Deloitte consumer business partner Sharon Fraser says: “The recent interest rate rise does not appear to have dampened consumers’ spending. Moreover, whereas consumer confidence took a hit in the run-up to Christmas last year - as it became clear that international conflict abroad was likely - it is expected to be more supportive this year.”
However, the increase in consumer spending will not necessarily be on food - in fact Verdict predicts food and drink will be the slowest growing sector, up only 1.2%.
The real growth, according to Verdict, will come from non-food, in particular music and video, toys and games and electricals. Verdict’s Richard Hyman says non-food will therefore be an essential ingredient to grocers’ sales and profit growth at Christmas.
And some supermarkets are well placed to benefit from this Yuletide uplift in non-food spend. One factor, says KPMG’s head of retail Amanda Aldridge, is that supermarket floor space dedicated to non-food has significantly increased, giving better availability. Plus, she adds: “People have to shop for food. Therefore non-food departments in the supermarkets benefit from a high footfall.”
Another advantage, says Aldridge, is that supermarkets offer a greater ease of shop over their non-food rivals in the high street. She believes consumers may choose to buy bulky non-food items in supermarkets because of better parking facilities, which helps in carrying them to the car.
Tesco and Asda should be the main beneficiaries, says David Stoddart, analyst at Teather & Greenwood. He believes a combination of longer opening hours, convenience, lower prices and greater choice will significantly increase non-food sales. But he thinks it is too early for Sainsbury’s newly launched non-food offering to really capitalise on this trend.
Sainsbury may actually be the big loser over Christmas. The reason, says one analyst, is that it does not offer a one-stop Christmas shop like Tesco and Asda, which have become true Christmas destination stores.
But even Tesco and Asda could face a slower pace later next year. Deloitte’s Fraser says: “In the second quarter, consumers borrowed more, relative to their income, than at any point in time. Sooner or later, they must start paying off their debt and the retail environment will get tougher.”
No comments yet