Asda plans move into convenience stores

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The Independent Online

Asda gave its strongest sign yet that it could move into the convenience market as it unveiled plans yesterday for a major assault on the non-food market.

The supermarket chain, which has ridden out a rocky patch, is opening 28 new stores this year, including 10 of its Asda Living outlets. It has halted expansion of its George high street clothing chain and its Essentials format, which sells basic ranges.

Andy Bond, the chief executive, said the group was studying the convenience market closely. "I'd be surprised if at some point we don't enter the market," he revealed. "We recognise convenience is growing quickly... [it] is a big market opportunity and a big consumer opportunity."

He is loath to "cross the Rubicon" of abandoning Asda's national pricing strategy - both Tesco and J Sainsbury charge more for items bought from their convenience stores - but aware that Asda needs to find new avenues for growth. He is also worried about diverting attention away from Asda's core supermarket business, which started growing again on an underlying basis last May after two troubled years.

He pointed out that it would take 500 convenience stores to deliver the same benefit as 10 new superstores or a 1 per cent rise in underlying sales. "Convenience stores are not the cake, they are the icing," he added.

Mr Bond, who took the helm nearly two years ago, said he was "open minded" about the future of the George and Essentials concepts. Asda has struggled to master the economics of running a high street chain. "We tried four or five things [different store formats]. One or two have worked, one or two are neutral," Mr Bond said. One of the new markets Asda is poised to enter is mobile telephones, its new marketing director, Rick Bendel, said yesterday. "We don't believe people should pay a premium for pay-as-you-go phones," he said. Mr Bendel is planning a new advertising campaign aimed at reminding shoppers of Asda's core strengths as a value retailer.

Mr Bond said Asda, which is owned by Wal-Mart, posted a "slight increase" in its profits last year, while also beating its US parent's internal sales plan with its strongest sales gain in two years. He said that at the other two supermarket chains in recovery mode last year - Sainsbury's and Wm Morrison - profits slumped.

Despite its well publicised gripes with the existing planning regime, which Asda believes favours Tesco, the group plans to open 18 new superstores this year. The new outlets will employ an additional 8,000 staff and will include Asda's first "ecologically sensitive store format" in Oldham. The outlet will be 20 per cent more energy efficient than the rest of the chain.

Asda, which said all segments of its business were growing faster than its rivals, intends to sell more premium and organic lines. "We have got to broaden our appeal. We have got to attract customers other than the budget shoppers," Mr Bond said.