Comment: George brand extension provides impetus for Asda’s non-food growth

Using the George brand to reinvigorate its home offer will allow Asda to take full advantage of a housing market recovery in 2014, and establish itself as a serious player in the homewares market.

Asda has made no secret of its wish to become the leading non-food retailer in the UK, but until now it has been slow to realise this goal. The George brand will provide an impetus to support this target in the short term, however in the long run the extension of the brand into other divisions, such as DIY and gardening, will be needed if it is to make the leap from competitive non-food retailer to market-leader.

The new homewares range must not be simply a rebranding exercise if it is to succeed in this competitive market. This would provide no differentiation with its supermarket rivals and restrict its ability to leverage the strength of the brand.

The focus on small ticket items initially is a shrewd move that will guarantee impulse purchases from shoppers. As well as the inevitable focus on value the range must complement the clothing brand with fashionability and innovative design helping establish its credentials.

While the expansion of Asda Living stores has been slowed, this format can give its non-food offer real impetus in the long run. John Lewis and Next both make use of out of town formats to showcase their home and garden ranges, and once established George can start to do this.

If the move into homewares is successful then Asda should extend the George brand to other areas of general home improvement, such as paint and wallpaper. This would justify the creation of standalone stores for the brand, and enable it to add big ticket items into its offer as well.

The timing of this move makes perfect sense with the UK housing market set to recover rapidly. Its main rivals will be the other supermarkets, and by using the strength of the George brand and Walmart’s significant buying power we forecast its share of the UK homewares market to grow by 0.3 percentage points in 2014 establishing it as the third largest homewares player with 5.1% market share.

Its value offer will also make it a rival to Dunelm, and while it is unlikely to threaten the position of the market leader in the short term, which currently holds a 7.8% market share, the additional competition Asda’s George range will provide will slow the growth rates Dunelm has achieved over the last few years, providing greater opportunities for second placed John Lewis, with 7.6% of the market, to close the gap at the top.

Michael Macdonald is a retail analyst at Verdict