The UK and US retail trend that could soon appear in Australia

There was a great article in The Daily Mail online last week by Anna Pursgrove.

The Mail online has grown from an okay, middle-of-the-road printed newspaper in the UK to an online monster, now apparently one of the widest read online publications in the world, and all content driven. Huge volumes of fast changing content where at least one article every day will be of deep interest to a reader.

Having written many times about ‘category creep’, the retailing phenomenon whereby a retailer of clothing introduces food items, or a retailer of furniture introduces a quick service restaurant, I read with interest Anna’s “How to buy your WHOLE wardrobe at the supermarket (for the price of a weekly shop)” article.

Before I share bits of it (it’s in the FEMAIL section of the Mail online if you want to read all of it), let me recap on the Ipsos ‘emma’ research on Australian retail trends I spoke about last week. Around 14% of our Australian monthly spend is on food, with 10% spent on clothing. So if a food retailer is going to creep into an adjacent category, make it a big one; in this case the next biggest one.

Remember, the key shopper criteria that supports category creep is that it saves the shopper time by allowing them to visit one big store for almost all their needs. But the adjacencies must be relevant to the shopper. Don’t put children’s clothing in a hardware store, for example.

So back to where this has worked well.

In the UK, all three major grocery manufacturers have created and managed the growth of retailer’s own brands of clothes, and they are now true ‘clothing brands’ in the shoppers’ minds; George at ASDA (and now in Coles), Tu at Sainsbury’s and F&F in Tesco. That’s creeping from food into clothing.

Costco in the US did too, translating their “Kirkland” food brand into clothing. Marks & Spencer in the UK has over many years “crept” from own retail brand clothing into own retail brand food, all under the M&S brand. This arguably saved the company in the late 80s.

In the US, Walmart built its one stop offering in the 80s and more recently mid-market Target in the US has crept from clothing and hard goods, into food under the “P fresh” project, with huge success.

So in Australia we have two major grocers, two major department stores, and three major discount department stores. Traditionally the ‘twos’ have made money competing with each other for our dollar whilst supplying our shopping needs in their categories; food and luxury clothing and high-end hard goods.

However, the ‘threes’ have only rarely ALL made good returns for their shareholders in any one year.

And each of the three – Big W, Target and K Mart – over the past 10 years have had their year in the naughty corner. The volume and profit in the discount department stores’ core clothing and hard goods sector may just be spread over one too many retail brands.

Several years ago, I spoke with a senior retail executive who had responsibility for international expansion, and I asked if their company had looked at opening in Australia. The executive said yes, but the zoning laws made it too difficult. The only way they would enter was via acquiring an existing retail network, probably one of the three discount department stores. And if they did, they would add food straight away.

So back to Anna and her shopping. In her words, in her “fantasy wardrobe, all the items not only suit me perfectly, but suit each other perfectly, too. They can be worn in any combination, each resulting in a polished, stylish look”.

So was she successful shopping for a clothing wardrobe at the grocery stores Tesco, ASDA and Sainsbury’s? Well she was able to buy a full 10-item outfit and a ‘capsule’ wardrobe for the price of one week’s shopping for £150 pounds (about $250 Australian). So that’s a yes.

I wonder what will happen first; will an international retailer acquire an Australian discount department store, or will we see food creep in alongside the clothing and manchester in one of them soon?