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George and Tu need careful management to maintain share says analyst

Published
today May 3, 2018
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While a consolidated supplier base will benefit Sainsbury’s and Asda, assuming their merger goes ahead, they will have to carefully manage the Tu Clothing and George fashion labels in order to avoid loss of market share and cannibalisation, an analyst said this week.


George at Asda



The two fashion labels offered by the supermarket chains are among the biggest fashion brands in the UK market at present and with both supermarket banners being retained, it seems likely that both fashion brands will survive too.

GlobalData said that both Sainsbury’s and Asda have significant stakes in the UK clothing market, with forecast value share for 2018 at 2.1% and 3.5% respectively, with Asda ranking fifth and Sainsbury’s 15th.

Senior retail analyst Mamequa Boafo said: “There is no doubt that the proposed merger of Sainsbury’s and Asda will lead to the consolidation of the supplier base of both parties which will assist in leveraging margins across both businesses. However there are questions as to how the Tu Clothing and George at Asda brands will be organised once the deal goes through and how the retailers will maintain their differentiation.
 
“Sainsbury’s is the more promising of the two in terms of growth potential, with market share gains of 0.3 percentage points over the past five years, compared with share decline of 0.5 percentage points for Asda, as it has managed to showcase its quality credentials while offering value for money, therefore luring shoppers from weaker mid-market players.”
 
Boafo said that keeping the Sainsbury’s and Asda brands ‘as is’ is the best way forward “as both Tu and George have their own USPs in the clothing market, and appeal to their individual customer bases. Any overlap between the brands would undermine their respective propositions and result in the cannibalisation of sales.”

However, if the Competition and Markets Authority (CMA) forces the merged business to shed some stores, this could hurt market share and analysts say that this places a greater focus on encouraging shoppers to switch to online for future growth.

Of course, there are other opportunities too. This includes rolling out Argos counters to Asda Stores and perhaps George even trying the premium model that Tu has introduced successfully in recent periods, unless the decision is taken to anchor George even more firmly in the value sector.

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