Britain's biggest food seller, Tesco, will become the UK's largest non-food retailer by the end of the year as it expands its offering via bigger stores and the internet, according to a new report.
Retailing research group Verdict said yesterday that Tesco's share of the non-food market this year was forecast to climb to 3.6 per cent from 3.2 per cent last year. This would push it ahead of Argos Retail Group, owner of Argos and Homebase, which Verdict forecasts to have a 3.5 per cent market share this year versus last year's market-leading 3.3 per cent.
Verdict said Tesco, valued at around £27.5 billion, and market heavyweights like J Sainsbury and Asda, the UK arm of the world's biggest retailer, Wal-Mart Stores Inc., were enjoying gains at the expense of rivals as they pushed into almost every area of retailing.
The report comes as Britain's competition watchdog the Competition Commission carries out an investigation into the country's £95 billion groceries market.
The probe, which could take up to two years, is looking at various areas such as supplier relationships, the structure of local markets and the effect of the planning regime, including retailers' sizeable land holdings.
"Tesco continues to add substantial new non-food space through mezzanines, store extensions and new store builds," said Verdict's senior retail analyst Alastair Lockhart.
"It is skilfully enhancing its ranges across all categories and leading the way in internet and in-store catalogues to create new opportunities," said Mr Lockhart who wrote the report.
Tesco's gains in web-based retailing were underscored by its 2005 annual results in April showing sales via its online site, which handles more than 200,000 orders a week, surged 32 per cent to almost £1 billion with profits up 55 per cent to £56.2 million.
Tesco has also been increasing its share of the UK grocery market, with data from research firm TNS in July showing the company had 31.5 per cent of that market, ahead of Asda's 16.6 per cent and Sainsbury's 16 per cent.
Numerous British retailers have recently blamed web retailing and supermarket giants for making business tougher.
Last week, Britain's third-largest specialist appliance seller Powerhouse became the latest retailer to go into administration, saying it was unable to compete with web-based rivals amid rising competition. Verdict said such competition would only become more intense, particularly as grocers win more market share thanks to their aggressive push into new areas and larger floor space.
Morrison, Britain's fourth-largest supermarket group, would have to develop its non-food offering if it wanted to boost market share, said Verdict, adding that the group was starting to look "quite exposed".
The report said that although consumer spending on non-food products rose just 0.9 per cent in 2005, grocers' non-food sales surged by 8.4 per cent, lifting their market share to 9.1 per cent from 8.5 per cent.
Verdict predicts that by 2007 grocers would account for one in every £10 spent on non-food products.
"As grocers expand their non-food offers, the competition will feel pressure like never before" said Mr Lockhart. "Whereas, in the past, grocers have typically taken a fairly opportunistic approach in their non-food development, they are now placed to take on specialist retailers head-to-head," he added. Tesco's finance director Andrew Higginson, speaking at the Reuters Consumer and Retail Summit in June, said non-food retail was an attractive and growing area for the company.
"Our non-food business, which we still describe rightly as small, growing and a big growth opportunity, is now seven billion pounds in turnover in the UK. It is less than seven per cent market share which why we talk about it as such an opportunity to grow," he told Reuters.
Verdict is owned by business information group Datamonitor Plc.