Asda plans to impress itself more thoroughly on the retail sector with its Living brand – and Graham Adams has to find the right properties.
Coleen McLoughlin was nowhere to be seen at the Carnaby Street, London, offices of Asda’s clothing arm, George. But a suitable model to replace her as the face of the brand, if not as fiancée of England footballer Wayne Rooney, was there in the shape of Graham Adams. Clad top to toe in George clothing, Asda’s property acquisitions director is a walking advertisement for his company.
Whether or not it was a deliberate move designed to impress EG Retail, Adams clearly feels comfortable promoting the Asda brand. And this faith is set to be tested over the next few years, as he takes on the task of opening more Asda supermarkets throughout the UK. The company plans to build a minimum of 18 stores this year alone, with further expansions planned in Scotland and Northern Ireland.
More ambitiously, Adams is setting out on a massive expansion plan for the company’s non-food offering, Asda Living – the concept that sells everything but food. The non-food sector was worth more than £2bn for all supermarket groups last year, and has become increasingly important to companies under pressure to increase their businesses.
Even though the Living brand was established three years ago, in Walsall in the Midlands, only nine stores have opened to date. That lowly number has left market commentators flummoxed, as they were convinced Asda was aiming to open at least 40 stores a year from the kick-off. “It seems it has got off to a slow start,” says one.
Adams is bemused by the suggestion. “We never give numbers,” he says. “I don’t think we ever said we’d do a certain [number by a certain] time. It was a trial concept. We launched a range of stores and we were testing them. I don’t see it as having gone any slower than we thought. We have to show due diligence.”
It may be later than the market anticipated, but in February, Asda announced there would be 10 more Livings “within the next 12 months”. Included in this are Belfast and Oldham which have already opened, and Lincoln, Durham, and Tottenham in north London, which are to open later this year. But the plan, revealed in August by Asda chief executive officer Andy Bond, who is prepared to reveal numbers, is to take Living up to 300. Precisely where the new outlets will be is a mystery, and Adams remains tight-lipped.
He will only go as far as to say that “300 sites have been identified”. However, given the size of store Adams is looking for – 20,000 sq ft, with a full-cover mezzanine to house the George brand – these will all be out-of-town and on retail parks.
The rental levels that Living is prepared to pay on each of the new sites will be, says Adams: “What we can economically afford. It will be down to our view as to what turnover that store will generate.”
He adds: “We see ourselves as an anchor. We can bring substantial uplift to a park, so we clearly won’t be paying the same rent as someone that will be paying for 5,000 sq ft.” Certainly, agents are aware of the pulling power and reputation Living has gained. For example, the head of Savills’ out-of-town retail team, Martin Supple, says he is desperate to get them into retail parks.
The format Asda now finds comfortable was only finalised after something of a learning process, and Adams admits there have been a few hiccups along the way. “We have experimented with stores of different sizes,” he says. “Our biggest is Thurrock, which was 28,000 sq ft on the ground floor – but that was too big. What Byker taught us was that we had to be on a park that had other clothing or electrical retailers on it, rather than stand alone. The range hasn’t really changed.”
But the confidence Asda now has in taking the Living brand forward is a result of the growth of the homewares market (see p30). Consumer spending on household goods – according to market research company Mintel, in its Homewares Retailing – UK report of April – was £9.8bn in 2006, up by 6% compared with 2001.
In particular, what Asda Living is tapping into is the public’s desire for disposable goods. “The whole non-food sector is clearly an area of growth,” says Adams. “With Wal-Mart [Asda’s parent company], we saw that happening more, and what we have found is that the UK is a disposable society and people want fast, convenient goods.”
Adams reveals that Asda’s own research puts the average UK disposable spend after mortgages and household bills as £148 per month, which it estimates will fall even further, to £80. “And this,” says Adams, hinting at the cheaper cost of the goods in Living compared with those in high street fashion homeware stores, “is one of the reasons why Asda Living will succeed”.
Another factor in that success, Adams believes, will be that “Asda Living is more than just homeware”. He explains: “It’s music, games, video. It’s broader than just homeware. So it’s not just bedding, dinner services, pots – we have the reputation across the range. There’s nobody else delivering this offer.”
If there is an alarm bell that Adams should heed, it is perhaps the fact that Tesco – which two years ago launched its own non-food brand, Homeplus – is moving more slowly with its expansion plans. This is despite Tesco “making the most rapid progress” in the non-food sector, according to Mintel.
Large numbers are not talked about. Instead, a Tesco spokeswoman says it will open 10 stores by 2009, bringing its total Homeplus outlets to 17.
But this doesn’t worry Adams, who was himself poached by Asda from Tesco three years ago, after 14 years with the rival retailer. He says that Homeplus differs from Living because the former has a larger format of up to 50,000 sq ft.
Adams says it is important for Living to get a march on its rivals. “It is because we have a strong reputation, and you can’t always say that about our competitors.” Living is innovative, he says – “and we certainly see it as industry-leading”.
Will this innovation move off the retail parks and onto the high street, to compete with the big fashion names such as Zara Home? “Never say never,” says Adams, although he points out there are problems in getting the required store sizes.
“If there are 300 markets to go at,” he adds, “we need to be able to adapt our format. Going forward, we will land as many conforming stores as we can. At the moment, we don’t regard us as being in-town quite now. The problem is finding regular-shaped 40,000 sq ft premises in town. When we were planning for George at 8,000 sq ft, it was incredibly difficult to find that type of store.”
Taking Asda Living into Europe is not ruled out, although Adams says he has “no remit” to look outside the UK – for now. And, he points out, George is a global brand with its clothes being sold in Wal-Mart stores.
One thing that doesn’t worry Adams is the entry into the market of other, similar, formats. “If someone is watching us and copies us, that’s the greatest form of flattery,” he says.
Graham Adams
1984 Greenwich University, estates management
1987 Jones Lang LaSalle, valuation team (graduate)
1988 Whitbread, estates/acquisitions manager
1990 Tesco Stores, development executive (UK)
1996 Tesco property director (Poland)
2004 ASDA Stores property acquisitions director
ASDA Living stores
? Walsall, Crown Wharf Shopping Park? Barnsley Cortonwood Retail Park? Altrincham, Altrincham Retail Park? Byker, Newcastle Shopping Park, ? West Thurrock Shopping Park? Glasgow Fort Shopping Park? Leeds, Crown Point Retail Park? Belfast, Yorkgate Retail & Leisure Parke_SFlb? Oldham, Centre Retail Park
Others to open/be developed:
? Tottenham Hale? Dartford ? Lincoln ? Durham
Games lead the way, with plenty more sectors still to play for
There is seemingly no stopping the rise of the non-food sector. Asda’s director of general merchandise, Peter Pritchard, says that at present general merchandising accounts for 35% of Asda’s total business, and he says this is set to climb in the next five years to a figure that he cannot even estimate.
While DVDs are still a strong selling point for the retailer, Pritchard says it is the “games sector which is really motoring.
“We don’t sell CD singles any more and that space has been given over to games,” he says.
With non-food doing so well, what of the prospect of an Asda Media spin-off, entering into Sky and Virgin Media’s territory? Or an Asda Megastore? Pritchard is hesitant, but says it is unlikely.
“I don’t think we would do broadcast media,but entertainment is a strength of ours. It’s now common on a new launch that we would achieve up to 20% of the total market sales.”
Pritchard says there are more than 100 non-food lines that Asda has yet to expand into, the outdoor sports goods sector being a prime example.
Meanwhile, the furniture sector is starting to grow. “We are selling George furniture, and larger appliances will be bigover time.”
Pritchard says the continued growth in non-food fits in with the company’s on line service, which is also expanding.
Customers are able to buy on line and collect their non-food goods from their local Asda store.
