The supermarkets’ increasing ability to provide shoppers with convenient and cheap non-food is cranking up the pressure on high street retailers. According to Verdict Research, the multiples pushed their share of the £111bn UK non-food market up from 8.6% in 1998 to 11.3% by April 2004. Rod Addy pinpoints how the multiples are hurting six key high street names

>>Fight back with Shapers. lower prices

The relaunch of Boots’ Shapers own label range in January, which won it Best Own Label Retailer award at The Grocer Gold Awards in June, was a coup. It reversed the brand’s falling sales, resulting in a year-on-year increase of 29% by June.

However, Boots has had to contend with initiatives such as Tesco’s Baby & Toddler Club, which helped it win Multiple Grocer of The Year at the same awards. Boots has also faced a raft of recent Tesco price cuts on health and beauty and baby products.

Boots retaliated with its Lower Prices You’ll Love campaign, which saw prices cut by 16% on 3,000 products.

The introduction of its Basics range of competitively priced health and beauty products from mid-April has also helped. But IGD’s Shopper Insight Report on non-food paints a bleak picture with two-thirds of 1,000 consumers asked preferring supermarkets to specialists when it comes to toiletries. >>p33 Focus on Toiletries

>>Aftercare advantage may not last

According to IGD’s Shopper Insight Report last month, consumers choose retailers such as Dixons above supermarkets for buying electrical goods. Verdict’s Non-Food in Grocers report in April showed Dixons as leading grocery multiples in its share of non-food with 4.2% share versus Tesco’s 3.6% and Asda’s 3%.

Analysts say one thing giving the retailer an edge is the quality of aftercare it provides. However, most multiples are incorporating customer help desks in the electrical goods zones in new stores.

Annual results show times are tough. Dixons Group sales are up, but sales at Dixons outlets themselves fell 6% to £798m in the year to May. It has closed 106 unprofitable stores and is trialling a new xL store format to improve performance. But Verdict says that if Tesco repeats its 1.2% growth in non-food share in the last five years, it could pass Dixons in the next five.

>>Catering for all tastes pays off

As if adjusting to people downloading music and films from the internet isn’t enough, HMV and similar retailers are seeing their market share threatened by the supermarkets. According to Millward Brown, by October 2003, 1,900 grocery multiple outlets were selling music compared with less than 1,000 in 1996. By November, Tesco said it was selling more chart CDs than Woolworths or Virgin Megastores. And by June this year it was claiming 60% growth in DVD sales.

Yet HMV sales were up 7.2% to £930.1m in the UK and Ireland in the year to April. CEO Alan Giles said: “HMV’s success is underpinned by a specialist retail proposition.” The retailer maintains its strength lies in its extensive back catalogue whereas the multiples can only stock more popular products.

HMV claims this is paying off, enabling it to remain the market leader in UK music sales by volume.

>>Will it see off the George challenge?

The biggest threat from grocery chains to clothing retailers such as Next has been Asda’s George. By June this year, the brand had become so successful that Asda had opened four standalone trial George stores.

The multiple announced in May that George would become a global brand, available in all 11 countries in which Wal-Mart operates. According to TNS Fashion Trak data in the 12 weeks to April, George had overtaken Debenhams to become the UK’s third largest clothing retailer, with sales topping £1bn, and is widely tipped to take the top spot by the end of the year.

Next has held up well, with sales of the Next brand up 14% to £2.34bn in the year to January. Group pre-tax profit was up 23% to £353m.

According to Verdict’s Maureen Hinton, it offers well made work wear and evening wear which is reasonably priced, but perceived as stylish.

WH Smith
>>Strong enough point of difference?

Like Boots, WH Smith began the year by announcing job cuts - not a good start. It acknowledges the inroads the multiples have made into sales of CDs, DVDs and console games have hit it hard, with its entertainments category hit the most.

With retail sales down 1% according to half-year results in April, group chief executive Kate Swann said the way forward lay in providing more specialised CDs, magazines and DVDs which the multiples would not sell. “The percentage of sales and profit from lines where we overlap with supermarkets varies materially and by category. Success is driven by a strong customer offer.”

WH Smith is focusing on its availability, store offer and ranges. Verdict’s Gavin Rothwell says that there are promising signs at the retailer: “WH Smith has doubled its range of greetings cards to 3,500.” He also said it was broadening DVDs to include less mainstream items.

>>Holding on in entertainment

The last year could have been better for Woolworths, which scrapped Big W in March and announced the downsizing of the existing 21 outlets which would revert to the standard fascia. Sales only rose 0.3% to £2.14bn in the year to March.

However new store formats such as 10/10, since conversions in autumn 2003, have shown steady growth.

Entertainment felt the pinch of competition from the multiples. But Woolworths succeeded in fending off the competition with aggressive pricing which helped it to win market share. Yet in confectionery it saw a reduction in share.

Woolworths has adopted a growth strategy consisting of a £14.7m IT spend, the pursuit of a ‘kids and celebrations’ proposition, restructuring and NPD.

In its full-year results, the company noted establishing product offerings the multiples are not already involved in had been “a major undertaking”.