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Property Special: Grocers grab their chance

Savvy supermarkets are steadily eating into a market once dominated by high street specialists and department stores.

Hot on the heels of the news that Asda had ousted Marks & Spencer as the UK’s second largest clothing brand by volume last month, German discount supermarket Lidl announced plans to enter the fray with a womenswear range (£3.99 to £14.99) under its Esmara brand, building on its basics offer. Rolled out across Lidl’s 600 stores from August 25, it will be followed by a new collection in the Livergy menswear range in November.

The message is clear: clothing will continue to increase in importance in supermarkets’ strategies as they compete with each other and with the wider high street, and that means we are likely to see their configuration and space requirements change as they give over more space to non-food.

Supermarkets have been growing their UK clothing stake for more than 10 years. In 2014 the grocers claimed a 9.6% market share, with George at Asda taking the largest proportion, followed by Tesco F&F and Sainsbury’s Tu, according to Verdict Research.

Since George at Asda became the first supermarket clothing own label in 1990, grocers have worked on the concept of ‘high street fashion at supermarket prices’. Tesco’s autumn 14 range, for example, averages at under £10 per item, with seasonal promotions like back to school always providing a strong uplift.

The optimum net selling space for a supermarket is 60,000 sq ft to 70,000 sq ft, with 5,000 sq ft to 15,000 sq ft tending to be devoted to clothing, explains John Witherell, head of supermarket agency and development at CBRE. However, he adds: “The supermarket retailers are increasingly looking at smaller high street convenience stores, which do not accommodate clothing.”

Celebrating its 25th anniversary Next year, George is stocked in 443 stores nationwide, with a further 127 supermarkets carrying underwear, accessories and school uniforms. The brand is also set to launch its first dedicated plus-size range (sizes 18 to 32) online from spring 15.

Despite having exited its standalone stores in 2008, George now typically occupies 13,000 sq ft of the 30,000 sq ft Asda Living stores, which exclusively sell clothing and general merchandise. The average garment-selling space in Asda Supercentres and Superstores food stores is 6,000 sq ft, rising to a maximum 20,000 sq ft.

“Over 3 million people shop at George on a weekly basis,” says its brand director Fiona Lambert. “George is the jewel in Asda’s crown; it is actually the number two reason to visit Asda, after value.”

Rival Sainsbury’s is the UK’s seventh-biggest clothing retailer by volume, with garments available in more than 400 stores. Some 7.5 million customers bought Tu clothing last year, generating sales of £750m. Collections are refreshed every eight weeks.

A typical 60,000 sq ft Sainsbury’s store dedicates 20,000 sq ft to non-food products, a ratio the grocer is looking to increase in non-food’s favour through extending existing property and new store openings. This week, Tu began a trial in which shoppers in the Midlands can buy the brand online.

Launched in 2001, Tesco’s F&F is now sold across 23 countries in more than 1,800 stores, including nearly 900 branches in the UK, 578 of which have a dedicated clothing area. A typical UK clothing department is 16,000 sq ft, as opposed to 23,000 sq ft in Poland, the Czech Republic, Slovakia and Hungary. Tesco also operates three F&F stores in Poland and the Czech Republic. A US franchise model in partnership with Alhokair launched in New York in July, with six more American stores in the pipeline.

About 250 people work in F&F’s buying, design and merchandising departments, such is its importance to the supermarket. Over the past two years Tesco has invested further to create a “high street” fashion environment in its bigger stores, exemplifying what it calls its “major transition from supermarket clothing to international fashion brand”.

F&F global brand and marketing director Anita Bolger explains: “Directional product, high-end styling paired with world-class models and a dedicated catwalk show during London Fashion Week are all ways of delivering an authentic fashion brand experience. F&F’s ambition is to be a global leading affordable fashion brand offering trend-driven fashion, with quality and ethical sourcing at its heart.”

Morrisons joined the party late, launching with kidswear collection Nutmeg in March 2013. Available in 240 stores, Nutmeg occupies on average 1,000 sq ft, with no plans for online retail. Prices start at £2 for a T-shirt, with most of the range at £5 and under. Head designer Katy Percival says the supermarket would relish the opportunity to launch womenswear and menswear, but at the moment is maintaining its focus on kidswear.

“Morrisons came to clothing retail quite late and had to fit the offering into existing stores, which are not particularly big,” says CBRE’s Witherell. “Entering a mature market, where its competitors had a 15-year head start, Morrisons is trying to gain market share at a time when fewer stores are being opened. It will take a long time for it to compete on an equal footing.”

Discounters are also eating into the monopoly of the big supermarkets. Aldi has sold its Specialbuys clothing line in the UK since 1990. Available in more than 500 stores, the collection goes on Sale every Thursday and Sunday, promoted on Facebook, Twitter, Pinterest and Vine.

Garments are located in display baskets at the centre of the store. The collection ranges from casualwear, maternity and sportswear, to plus-size, babywear and school uniforms, priced at £4 and upwards. According to Tony Baines, joint managing director of corporate buying at Aldi, the focus is on expanding the overall store portfolio, with no current intention to offer ecommerce or click-and-collect.

Lidl operates a similar model across its brands: Esmara (womenswear), Livergy (menswear), Lupilu (infants), Pepperts (children up to 14 years) and Crivit (sports clothing). Non-food manager Josie Stone sees clothing becoming increasingly important to its business, with sales up 30% year on year, though garments will not be sold online in the near future.

Witherell argues Lidl and Aldi will have to adapt their strategy if they want to compete with the scale of clothing ranges offered by the big supermarkets. “The size of the stores would have to increase from 10,000 sq ft to between 20,000 and 30,000 sq ft. We have not, however, received any message that they are looking at bigger stores.”

Over the past five years, all the supermarkets have invested in design, shorter lead times and increasing the frequency of styles, according to Verdict Research. Their main competitors are Primark, New Look, Matalan, Peacocks and Amazon, as well as mid-market players like M&S, BHS and Next. Verdict sees Tesco trying to attract a younger UK consumer through ad campaigns - centred on key trends - that rival those of Primark, Forever 21 and Boohoo.com.

Tesco’s aim is to make F&F a ‘destination brand’, merchandised in a way that mimics a high street fashion label. “We separated the F&F shopping experience from the grocery environment to reinforce the brand and introduced multichannel technology to drive awareness of our extended F&F range online, which can also be accessed through 120 in-store kiosks,” Bolger explains.

The F&F Next Generation Store refresh programme will be rolled out to 1.7 million sq ft of retail space across 270 UK stores by the end of 2014, while next day click-and-collect is already available in more than 900 Tesco stores.

In August, Sainsbury’s piloted its Tu collection online with customers in the Midlands, who could choose between click-and-collect and home delivery services, with orders fulfilled from Sainsbury’s clothing depot in Bedford. Non-food trading director James Brown argues 2014 is the right time for a multichannel approach.

Last year, Sainsbury’s doubled its design team to 30 people, investing heavily in improving fabric quality with the introduction of more expensive materials such as leather and linen. By the end of 2014, the grocer will have introduced its new ‘department store’ concept to 150 stores nationwide. First trialled in King’s Lynn, Norfolk, in November 2012, the format features graphics, bold signage, low-level gondolas and clothing displayed on mannequins.

However, the ability to continue expanding out-of-town stores is dependent on local government policy. Councils must weigh up the concern that out-of-town growth will damage the high street, against the potential to create jobs. “Planning policy is often ‘town centre first’ and supermarkets that have a smaller town centre store are unlikely to want to devote floor space to non-food items,” explains Witherell.

Joanne Wilkes head of in town retail at property investor F&C Reit, says depending on the location, supermarkets selling clothing could be more attractive to landlords: “When supermarkets also sell clothing it adds diversity, which has got to be a positive thing. Supermarkets can anchor shopping centres, and selling clothing as well as groceries can create more of a pull.”

Witherell adds that landlords are in favour of a dual offer, which improves the competitiveness of stores.

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