As retailers brace themselves for more cutthroat grocery pricing, declining margins and increased competition from every retail channel, many chains are turning to an old friend to help pull their balance sheets out of the competitive fire - non food.
Elsevier Food International, Vol. 8 Number 3, September 2005
Len Lewis

Non food has been arNound since the inception of the supermarket industry, butreally became a staple in the 1950s and 1960swhen hypermarkets were launched in Europeand ‘combination stores’ hit the retail scene in the US. Non food reached new prominence in the 1990s when Wal Mart’s supercentres made general merchandise a key profit contributor.
Since then, declining sales in the core grocery business has made non foods even more attractive as a way to get growth out of mature markets. Additionally, chains in the UK and France are battling regulations designed to stifle expansion and are turning to non foods for market share growth.
This is the case with ASDA, Tesco, Auchan as well as Leclerc, ITM and Intermarché, which have already branched out into speciality clothing and do-it-yourself (DIY) stores.

Strong traditions
“European retailers have a strong heritage of offering non foods. But there seems to be a greater sense of focus, efficiency and purpose among retailers recently,” said Bryan Roberts, senior retail analyst, Planet Retail, London.  Jean-Jacques Vandenheede, vice president, retailer services in Europe for ACNielsen,  Belgium, agreed. “Non foods have always been  important because we have such a long history with hypermarkets where 50 per cent of turnover is coming from non food items such as textiles, household electrics and sporting goods.”
However, the numbers seem to be rising in conventional stores as well, he said, noting that  when supermarkets expand selling areas in existing stores, the most likely component of  that will be in non food. “In fact, non foods are taking a larger than normal proportion of space in both new and existing stores,” he said.
This trend will likely continue. Anders Moberg, president and CEO of Ahold, told the annual  ,meeting in May: “Expanding the range and quality of general merchandise throughout the  company is a significant growth opportunity. We want to help customers make the best choice. If we get that right, our ambition is to double non-food sales in the next five years from 5.5 per cent to 11 per cent.” Although Ahold declines to discuss specifics at this point,  a company official states that Ahold’s non-food growth strategy is a global one, with particular emphasis on, increasing space for non food at stores in Europe and the US. However, hedeclined to identify specific growth categories at this point.
Tesco is by no means alone. In Spain, Carrefour is converting 11 supermarkets into, hypermarkets without increasing the sellingarea but adding non-food lines. Overall, thechain wants to increase hypermarket non-food sales above the 40 per cent level while increasing pre-tax profits and refocusing on promotions that will make general merchandise more price competitive. At present, pure general merchandise - excluding apparel and consumer electronics - accounts for 14 per cent of the chain’s hypermarket sales.
Tesco is pushing aggressively into household goods and clothing and achieved a 17 per cent increase over the past year, according to chief executive Terry Leahy. “We’ve seen non food growing faster (than overall sales) and we hope to keep up the rate of growth,” he said, noting that particularly strong increases in 2005 came from CDs and DVDs which grew at a 20 per cent rate while magazine sales rose 26 per cent.
Now, the chain is going into digital products in about 200 larger stores from such brands as Sony, Apple, Kodak, Olympus and Canon.

Non-food stores
Additionally, the chain recently confirmed a long-rumoured move to freestanding non-food stores under the Homeplus banner stores opening in Aberdeen and Manchester before the end of the year. The stores will supplement Tesco Extra stores, which also carry extensive non-food lines but are only available to about 20 per cent of the UK population, according to marketing director Tim Mason. Homeplus will also carry Tesco’s full clothing lines and if successful, will be rolled out across the UK, company officials noted. Key to Tesco’s success in non foods is its ability to secure long-term rights to the Cherokee clothing brand, which is marketed by Target in the US and Carrefour in other countries.
Meanwhile, ASDA and Wal-Mart have strong synergies in apparel with Wal-Mart stocking the George line in US stores and ASDA marketing Wal-Mart’s Kids Connection products. In other categories, ASDA’s success is due to participation in Wal-Mart’s global buying and passing savings on to consumers,” said Roberts, citing a DVD player selling for a phenomenally low UK£30.
Auchan opened its first Eurobounta non-foods store in June in Aubervilliers. Modelled after the dollar-store concept in the US and Japan’s 100 yen stores, the store measures approximately 530 sq.metres and carries some 2,500 items. Nothing is priced higher than one euro, a level that is designed to spark impulse buying. Reports indicate that Auchan plans to open another 40 Eurobounta stores – each measuring about 299 metres - enabling the French retailer to circumvent regulations governing new store sizes.
ASDA’s non-food store, ASDA Living, opened its third unit last October in Brampton in, Northern England. More outlets expected before the end of the year. The chain still considers this a test and is hoping to increase family traffic with extensive selections of toys, garden furniture, digital cameras and mobile phones. ASDA is confident the stores are on the right track when it comes to consumer demand. But Eugene Gallagher, general manager of the non-food group conceded that the economic environment could lead to consumer belt tightening. “The challenge for retailers is to offer great products and great value,” he told those gathered for the opening of the latest store. As ACNielsen’s Vandenheede noted: “I can’t read ASDA’s mind. But building brand equity and recognition is the strategy for most retailers. This may be a pragmatic decision because some locations may not be big enough for a supercentre. We’ll have to wait and see if the stores meet their objectives,” he said.
Early reports suggest the concept is doing well, according to Planet Retail’s Roberts. “It’s a split level store with the downstairs devoted to toys, electrical, entertainment and health and beauty care as well as some food merchandising. The entire upstairs is devoted to a café and the George clothing line,” he said. “They do consider it a test and no one knows how many they plan to open. But some are forecasting 25 within the next four years.”

Surplus outlet?
Aldi Süd in Germany has a different strategy. An old 500-squaremetre Aldi store in Mannheim- Waldhof was reopened under the 1001 banner and is only meant to be an outlet for surplus

Carrefour wants to increase hypermarket non-food sales above the 40 per cent level.

promotional goods. However, Aldi has said that it will open more stores if the concept succeeds. If it does, some observers believe it may become more than just an outlet for surplus non foods. In the US, where nonfood sections in Aldi stores are rather  haphazard in appearance, the company seems to be bringing more non foods in to the mix with an eclectic assortment ranging from a DVD/VCR combination for US$69.99 to hydraulic car jacks at US$15.99. “Aldi is very consistent and has been using non foods as exceptional promotions for some time,” said Vandenheede. “They announce something on a specific day and put it up for sale the next. When it’s gone, it’s gone so they are self-liquidating.” But when they sell something it moves in quantity. “One of every three computers in German homes was bought during one of Aldi’s promotions. Products tend to be high quality and up to date. This is also true of Lidl and Plus because the discount movement is so dominant in Germany. With thousands of these outlets across Europe, it’s not too difficult to take stock left over in one country and create a promotion out of it in another.”

Aldi Süd in Germany has opened the 1001 banner as an outlet forsurplus promotional non-food goods.

Roberts had a different view. “I think Aldi’s 1001 store is an innovation born of necessity rather than genius. It’s pretty much a mechanism to clear surplus stocks, not a great strategic move into non foods.”
Roberts is forecasting fairly modest growth for 1001 as Aldi builds it into a regional clearing house for surplus stocks. “I can’t see them developing it into a national chain because they simply wouldn’t have enough stock on any one thing to go around,” he said, noting that it’s as no frills as regular Aldi stores with lots of things just plunked down on tables. “It’s no Harrods,” he said. It’sa big contrast between this and ASDA Living which was a strategic move to launch a dedicated non-food concept.”