Are its supermarket rivals anywhere near catching up on the success of George?
Heken Gregory reports
The potential wins for the grocery multiples in the clothing market are huge, particularly as they are competing with the traditional high street boys who operate from much more costly floor space. At about 40%, margins are a lot higher than on food, so even when clothes are marked down (it is estimated up to 25% of supermarket stock is), it's still a healthy 36%-37%.
According to Verdict, the multiples dramatically increased their share of the clothing and footwear market to 5.5% in 2001 up from 3.7% in 1996.
Tesco has its eye on the prize and is working hard to up its 7.8% share of the clothing market to catch Asda's 16%. (Tesco clothing is reckoned to make up 1.4% of total sales while Asda's is 8%.) Much is riding on the new Cherokee range, heralded as a "massive gear change in the UK fashion market".
Tesco clothing boss John Hoerner knows it needs a better clothing brand to appeal to higher income Tesco shoppers as the current Value and Fred & Florence ranges are believed to mostly sell to lower income groups and are periodically marked down, achieving lower gross profit. Although it is an unknown quantity in the UK, Cherokee has quadrupled sales in the US and Canada over the last five years and Tesco will hope for similar growth here where the lines sell for aboutt 30% less than Next clothing. Retailers using the Cherokee brand can leverage buying economies to source products according to their domestic specs, so attaining better margins.
Tesco will not reveal much about how it's going, but a spokesman says: "Customers love the Cherokee brand which offers great quality fashion at unbeatable prices. The range has exceeded our expectations and is achieving double-digit growth."
The City seems to think Cherokee might be just what Tesco needs to gain a more respectable market share in clothing.
One analyst comments: "Cherokee says 50%+ gross margins are achievable, so the brand should enhance Tesco's total clothing cash gross profits. The issue now is whether Tesco can execute this new brand strategy without any delays or incurring higher costs."
He reckons Cherokee has a better chance of succeeding than previous attempts "because it has been created by clothing people rather than glorified baked bean people".
Richard Hull, Cap Gemini's UK retail and distribution leader, consumer products retail and distribution, believes the chain is going the right way about it. "It has outsourced core functionality and taken away having to find suppliers and sort the range," he notes.
The power of George
But it will be some time before Tesco comes anywhere near George; according to analysts, the label is turning over £950m, while Tesco is doing £340m and Sainsbury's Jeff & Co is at £50-80m. Some 30% of Asda customers shop at George. Meanwhile, turnover has grown 30% year-on-year and remains on target to be £1bn by the end of the year.
Asda has one huge advantage Wal-Mart. Its huge buying power means the chain can buy fabric up to 60% cheaper and buttons and zips 15% cheaper. These cost savings get passed on the average price point at George is now 40% lower than two years ago.
George MD Andy Bond believes that to attract more customers, George must stick to four principles: lower prices through better sourcing; extend the product range; improve availability; and improve customer service. "This is the basis of great retailing. If we innovate around these core strategies we'll continue to grow," says Bond.
Superior supply chain and distribution systems have taken the Leeds retailer into a bigger league; if a line is selling particularly well, Asda can more easily book factory space in an international market - something the others do not seem to be able to do as readily.
Sainsbury appears to be lagging on sales and headlines. It launched Jeff & Co in early 2001 aiming to "take supermarket fashion to a new level, rivalling the current high street retailers" according to Sir Peter Davis. It now has an offer in 46 stores with three more coming on line this month. Adams runs its childrenswear concession. But the multiple is now looking a bit more serious by appointing Richard Jones as new general manager on clothing and claims to be "very committed" to clothing ranges.
Food people don't make great clothes people
But you need space to display clothing properly and to look credible. Asda and Tesco to some extent have that. Sainsbury, however, has more of an issue. While Tesco Extra stores allocate 11.5% of space to clothing & footwear, Sainsbury typically allocates 3,000-5,000 sq ft of selling space in bigger stores to Jeff & Co.
It has also been criticised for not having great logistics. Clothes do not naturally fit in a supermarket, but one analyst reckons: "You would be amazed at how often supermarkets still try to apply fmcg methods of continuous replenishment to slow moving goods. It just doesn't work. Sainsbury is using its food people to fill the gaps in non-food."
George has its own dedicated staff, separate from the rest of Asda, but there are still plenty of staff in this area who are not fashion specialists. However, Cap Gemini's Hull reckons the chains are starting to recruit buyers and category managers away from food.
The Co-operative Group uses only clothing concessions in its stores. A spokeswoman says: "We have no plans to enter this market ourselves other than on a one-off promotional purchase basis."
But Hull is not convinced retailers generally have the right environment to sell clothes when they are "stacked up alongside ice cream and beans. Clothing will undoubtedly grow, but it will be evolutionary, not revolutionary."
Although kids' stuff does well, none of the supermarkets have cracked the womenswear nut. The holy grail is disposable fashion and only Asda is really beginning to scratch the surface with its George Fast Fashion womenswear ranges. These get to stores seven weeks after their catwalk debut instead of the usual 18, and Asda has just announced that it will triple the space dedicated to this range.
Analysts reckon the prizes are there to be had if food shoppers can be converted into clothes shoppers and that, if this happens, clothing could end up with the same sort of share as toiletries.
The average shopper may still have a hang-up about sticking a silk blouse in a trolley full of veg but that could change as destination stores encourage shoppers to spend more time in a store with a "fashion" mindset. Asda's already on the case, and with Tesco doubling its Extra format year-on-year, and Sainsbury's announcement to open more Savacentres, the multiples' wardrobe space is set to get a lot bigger.
{{ANALYSIS }}
Heken Gregory reports
The potential wins for the grocery multiples in the clothing market are huge, particularly as they are competing with the traditional high street boys who operate from much more costly floor space. At about 40%, margins are a lot higher than on food, so even when clothes are marked down (it is estimated up to 25% of supermarket stock is), it's still a healthy 36%-37%.
According to Verdict, the multiples dramatically increased their share of the clothing and footwear market to 5.5% in 2001 up from 3.7% in 1996.
Tesco has its eye on the prize and is working hard to up its 7.8% share of the clothing market to catch Asda's 16%. (Tesco clothing is reckoned to make up 1.4% of total sales while Asda's is 8%.) Much is riding on the new Cherokee range, heralded as a "massive gear change in the UK fashion market".
Tesco clothing boss John Hoerner knows it needs a better clothing brand to appeal to higher income Tesco shoppers as the current Value and Fred & Florence ranges are believed to mostly sell to lower income groups and are periodically marked down, achieving lower gross profit. Although it is an unknown quantity in the UK, Cherokee has quadrupled sales in the US and Canada over the last five years and Tesco will hope for similar growth here where the lines sell for aboutt 30% less than Next clothing. Retailers using the Cherokee brand can leverage buying economies to source products according to their domestic specs, so attaining better margins.
Tesco will not reveal much about how it's going, but a spokesman says: "Customers love the Cherokee brand which offers great quality fashion at unbeatable prices. The range has exceeded our expectations and is achieving double-digit growth."
The City seems to think Cherokee might be just what Tesco needs to gain a more respectable market share in clothing.
One analyst comments: "Cherokee says 50%+ gross margins are achievable, so the brand should enhance Tesco's total clothing cash gross profits. The issue now is whether Tesco can execute this new brand strategy without any delays or incurring higher costs."
He reckons Cherokee has a better chance of succeeding than previous attempts "because it has been created by clothing people rather than glorified baked bean people".
Richard Hull, Cap Gemini's UK retail and distribution leader, consumer products retail and distribution, believes the chain is going the right way about it. "It has outsourced core functionality and taken away having to find suppliers and sort the range," he notes.
The power of George
But it will be some time before Tesco comes anywhere near George; according to analysts, the label is turning over £950m, while Tesco is doing £340m and Sainsbury's Jeff & Co is at £50-80m. Some 30% of Asda customers shop at George. Meanwhile, turnover has grown 30% year-on-year and remains on target to be £1bn by the end of the year.
Asda has one huge advantage Wal-Mart. Its huge buying power means the chain can buy fabric up to 60% cheaper and buttons and zips 15% cheaper. These cost savings get passed on the average price point at George is now 40% lower than two years ago.
George MD Andy Bond believes that to attract more customers, George must stick to four principles: lower prices through better sourcing; extend the product range; improve availability; and improve customer service. "This is the basis of great retailing. If we innovate around these core strategies we'll continue to grow," says Bond.
Superior supply chain and distribution systems have taken the Leeds retailer into a bigger league; if a line is selling particularly well, Asda can more easily book factory space in an international market - something the others do not seem to be able to do as readily.
Sainsbury appears to be lagging on sales and headlines. It launched Jeff & Co in early 2001 aiming to "take supermarket fashion to a new level, rivalling the current high street retailers" according to Sir Peter Davis. It now has an offer in 46 stores with three more coming on line this month. Adams runs its childrenswear concession. But the multiple is now looking a bit more serious by appointing Richard Jones as new general manager on clothing and claims to be "very committed" to clothing ranges.
Food people don't make great clothes people
But you need space to display clothing properly and to look credible. Asda and Tesco to some extent have that. Sainsbury, however, has more of an issue. While Tesco Extra stores allocate 11.5% of space to clothing & footwear, Sainsbury typically allocates 3,000-5,000 sq ft of selling space in bigger stores to Jeff & Co.
It has also been criticised for not having great logistics. Clothes do not naturally fit in a supermarket, but one analyst reckons: "You would be amazed at how often supermarkets still try to apply fmcg methods of continuous replenishment to slow moving goods. It just doesn't work. Sainsbury is using its food people to fill the gaps in non-food."
George has its own dedicated staff, separate from the rest of Asda, but there are still plenty of staff in this area who are not fashion specialists. However, Cap Gemini's Hull reckons the chains are starting to recruit buyers and category managers away from food.
The Co-operative Group uses only clothing concessions in its stores. A spokeswoman says: "We have no plans to enter this market ourselves other than on a one-off promotional purchase basis."
But Hull is not convinced retailers generally have the right environment to sell clothes when they are "stacked up alongside ice cream and beans. Clothing will undoubtedly grow, but it will be evolutionary, not revolutionary."
Although kids' stuff does well, none of the supermarkets have cracked the womenswear nut. The holy grail is disposable fashion and only Asda is really beginning to scratch the surface with its George Fast Fashion womenswear ranges. These get to stores seven weeks after their catwalk debut instead of the usual 18, and Asda has just announced that it will triple the space dedicated to this range.
Analysts reckon the prizes are there to be had if food shoppers can be converted into clothes shoppers and that, if this happens, clothing could end up with the same sort of share as toiletries.
The average shopper may still have a hang-up about sticking a silk blouse in a trolley full of veg but that could change as destination stores encourage shoppers to spend more time in a store with a "fashion" mindset. Asda's already on the case, and with Tesco doubling its Extra format year-on-year, and Sainsbury's announcement to open more Savacentres, the multiples' wardrobe space is set to get a lot bigger.
{{ANALYSIS }}
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