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Fashion is key battleground for supermarkets

The battle for supermarket supremacy could hinge on fashion, experts said in the week following Tesco’s latest profit warning.

Consensus is growing that clothing sales will be a key focus for Tesco, Asda and Sainsbury’s as they try to keep discounters such as Lidl and Aldi from stealing market share.

It comes after Tesco issued a profit warning on August 29 and parachuted in new chief executive Dave Lewis a month earlier than planned on September 1.

Research has shown that clothing is one of the most profitable and fastest-growing areas of supermarket sales. Tony Shiret, analyst at Espirito Santo, said Tesco’s failure to properly capitalise on this was one of the reasons it had struggled to compete on pricing overall.

He said supermarkets in general were “behind the curve” when it comes to fashion, especially online.

“Sainsbury’s only just launched online, Tesco has only been doing it for a couple of years; they have probably seen some erosion in clothing sales [as a result].”

Neil Saunders, managing director of retail research agency Conlumino, agreed: “While groceries are the mainstay of their business it’s not as lucrative as it once was and they can’t get the growth they want from it, so they need to look at other areas – and fashion is one of those.”

George at Asda brand director Fiona Lambert told Drapers her main priority over the next few months was to expand george.com in line with Asda’s ambition to grow its etail business to £3bn by 2018.

Sainsbury’s began trialling online sales of Tu last weekend (September 1). If successful, the service will be rolled out in 2015.

Tesco said its ambition was to make F&F the “world’s leading affordable fashion brand” by improving areas such as click-and-collect.

A spokeswoman for Tesco said: “Our clothing offer has been growing strongly.  We have introduced our ‘Next Generation’ F&F departments to 170 of our stores, with average like-for-like sales growth of 10%. Clothing online continues to perform strongly, with sales growth of nearly 60% in 2013-14.”

Readers' comments (1)

  • Fashion offers much, much higher margins than traditional grocery products. Cash margin is also good per item.

    Supermarkets have commoditised many categories to date. I believe they will do so in fashion, especially for childrenswear and basic essentials.

    Enormous weekly footfall in store and massive email databases of customers to target are catalysts.

    Traditional fashion retailers (inc department stores) and brands need to up their games to compete. Quickly (though I'm not seeing it). In my opinion, there is simply not enough effort behind understanding the customer or giving great service in store.

    Along with the likes of Amazon and eBay, the supermarkets will use their scale to great effect. They already use their customer sales data in other categories to improve ranges and optimise sales. I'm sure they are doing so in fashion. Signs are clear they are already looking beyond value ranges.

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