Suppose there were a category of product supermarket operators could bring into stores that could become a significant new profit center, plus strike a strategic blow against discount stores.
Suppose further that the category is currently under use to good effect in supermarkets in the United Kingdom. Would the situation be worth a look?
Well, SN has taken a look at this category. It forms the basis of a news article in this week's issue, and it was the subject of a news feature in a previous issue. The category is apparel. This week's article details how apparel has worked to the advantage of Tesco. See Page 41.
Let's take a closer look at what apparel does for Tesco in the United Kingdom, then briefly look at how it's working for Asda, also in the United Kingdom.
This week's news article is based on a talk given by John Hoerner, a Tesco executive, at a CEO Summit conference in New York, together with information from an earlier interview conducted with him in London by Samantha Conti, the London-based bureau chief for Fairchild Publications, of which SN is a unit.
The crux of what has been learned from Hoerner lately is that apparel has become an important element of Tesco's product offer. Apparel yielded the equivalent of about $826 million during the company's most recent fiscal year. Such sales are likely to increase to $1.5 billion this fiscal year. Tesco's total worldwide top line was about $43 billion last fiscal year.
Hoerner said logistics behind apparel are kept simple, since the category is distributed to stores using the incumbent food distribution system. That is accomplished by looking at apparel in terms of making sure a broad range of sizes in every line is present in stores. That simplifies Tesco's task considerably, relative to traditional clothing retailers, in that whims of color and fashion don't drive distribution.
After his presentation in New York, Hoerner was asked why he thought U.S. supermarkets don't typically devote much space to apparel. He said it might be that U.S. supermarkets are reluctant to take the chance of devoting space to an unproven category. At Tesco, he said, the decision was made to build larger stores with the idea that suitable new categories would be discovered and brought into the space. That may or may not be why apparel doesn't move the meter much in this country, but the thought that food retailers are reluctant to chance category experimentation is no doubt valid.
A bit more about apparel was discussed in these pages in the issue of Oct. 18, 2004. In that issue of SN was a feature article concerning Asda, the British unit of Wal-Mart Stores. Asda, too, has found good success with apparel, specifically with the George label. Indeed, Asda now sells more apparel than any other British retailer, unseating Marks & Spencer from that distinction.
The George line is now available in Wal-Mart discount stores and supercenters in this country. Why not apparel for U.S. supermarket operators, too?