Will Asda and Tesco be the winners next year?

Variety store Woolworths collapsed a year ago this week, and grocers Asda and Tesco have wasted no time in scooping up the famous high street chain’s market share. Their growth in non-food has been massive in the last 12 months and according to research commissioned by Retail Week from Verdict, Asda and Tesco have secured the most from Woolies’ downfall. Asda has won £74.9m worth of sales and Tesco has £70.8m.

The rise of the two biggest supermarkets’ non-food offer cements a fundamental switching pattern for consumers. Shoppers’ switch to supermarkets for non-food could be because of convenience, price or increasingly range. But whatever it is, Asda and Tesco are not letting go.

Both are going all out to win the non-food war. Tesco has ramped up ranges in areas such as toys, stationery and entertainment, while Asda has been staging special offer events for different non-food areas such as toys, technology and clothing. At Asda’s recent toy event it sold 30,000 doll’s houses in one week – and the grocer said it could have sold more – and at its technology event, it sold 7,000 of a particular kind of TV in one week when it previously only ever sold 2,000 in a week.

Asda and Tesco’s strength in non-food could mean that they emerge the grocery winners next year. With food deflation, Asda and Tesco are likely to make up some of the shortfall next year in non-food and that might mean Sainsbury’s and Morrisons start to show the strain.

Sainsbury’s – it must be pointed out – does have some non-food but not to the extent of Asda or Tesco. It is investing in home and clothing and making sure those shops that are big enough have a good range, but it has a way to go yet. Sainsbury’s has also launched non-food online but again, it’s at an early stage.

Morrisons has not really made serious in-roads into non-food, and while it is making those ranges work better in stores, it has no plans as such to go heavily into the area. It also doesn’t have the space in its stores to have an extensive non-food range.

Morrisons has been the success story of the year, but it may start to struggle in 2010. And while Sainsbury’s has so far defied the recession with its canny planning, it may too feel the brunt of Tesco’s return to form. And Asda’s strong value message has meant it has performed well this year, and this looks likely to continue into next.