Asda revealed last week that it would be opening 32 standalone ‘Asda Express’ stores over the next year, moving into the convenience sector for the first time as it moves to overtake Sainsbury’s as the UK’s second-largest supermarket.
Asda’s owners, Mohsin and Zuber Issa, have made no secret of the fact that they have grand ambitions for the supermarket group. As early as March this year, Mohsin told the Sunday Times that the pair planned to leapfrog Sainsbury’s and take second position behind market leader Tesco.
The plan to expand its convenience arm has been a fundamental part of Asda’s long-term plan, with the only real surprise being that it has taken so long. The convenience channel is an important part of the UK grocery landscape, with other supermarket giants boasting strong offerings in this category for years, including Tesco’s Express, Sainsbury’s Local and Morrisons Daily.
Asda has historically focused on larger stores, with its only convenience offering currently limited to Asda On the Move stores, which are located on garage forecourts owned and – crucially – operated by EG Group.
However, that will all change later this year, when Asda’s first two standalone convenience stores will make their mark in Sutton Coldfield and Tottenham Hale, opening in November and December. The remaining 30 sites, which will form the foundation of Asda’s convenience portfolio, are expected to open at some point within the next year.
With the openings of two stores just around the corner, the move comes as part of Asda’s ‘test and learn’ approach in looking to develop its convenience model and boost its market share.
But what will this involve, how valuable will the convenience drive be to the supermarket giant and will this be enough to conquer a higher spot on the grocery pecking order?
What to expect from Asda Express
Located in residential areas, the stores will stock around 3,000 products including fresh, ambient and chilled groceries as well as a range of hot and cold ‘food for now’ options in partnership with healthy fast food company, Leon.
Its first two stores will also offer ‘toyou’ parcel collection and return services, as well as an Uber Eats rapid delivery service soon after the openings.
Asda co-owner Mohsin Issa says that this “is a landmark moment” and a “key step on our journey to bring Asda to more customers in more communities right across the UK.”
“The stores have been designed to cater for a broad range of customer needs – whether that’s popping in for a pint of milk, grabbing a spot of lunch on the go, or buying fresh ingredients to cook dinner from scratch.”
He adds that the grocery retailer is “confident customers will find everything they need in these stores and enjoy the convenience of having a new type of Asda store on their doorstep.”
Although an Asda convenience store might not seem like a new concept, given the current 50 Asda ‘On the Move’ stores located on garage forecourts across the UK, these are owned and operated by EG Group. The sites provide 1,300 branded and Asda-own label products, but are supplied on a wholesale agreement to the British convenience retailer.
Asda has confirmed that its new Express stores will be completely separate from these, as they will be wholly owned and operated by the Big 4 grocer.
The new Asda Express stores will also remain separate from the 132 forecourt retail stores Asda acquired from the Co-op Group earlier this year; a move which also significantly boosted the privately-owned supermarket chain’s market presence in convenience retailing.
The value of convenience
The UK’s convenience market is estimated to be worth £45.2 billion, a growth of 3.2% compared to the same time last year according to the 2022 Lumina Intelligence UK Convenience Market Report.
Insight director Blonnie Whist said: “UK convenience retail remains in a strong position. Despite cost-of-living challenges, the market will benefit from a resurgence in on-the-go missions in 2022, as shoppers seek more accessibly priced options compared to foodservice channels.”
According to data from location analytics software firm, Pathzz store visitation to retailers including Tesco Express and Sainsbury’s Local stores increased by 10.4% year on year in April and a total of 4.83% for the quarter against the same period in 2021.
The Association of Convenience Stores (ACS)’ Local Shop Report – also found that the convenience sector is set to grow to £48.6 billion by 2025.
ACS chief executive James Lowman says: “local shops are well placed to support their customers during this difficult time through a diverse range of products and services, helping consumers manage their money and making a really positive impact in the communities that they trade in.”
By 2027, sales are forecast to grow by 13% to over £50 billion according to IGD, giving Asda a “significant opportunity” to grow both sales and market share.
For many, Asda’s convenience offerings have been a long time coming.
Ecommerce and sales leader Dean McElwee says there are a number of reasons that Asda’s move makes sense, primarily that “brand awareness translates easily to the channel”.
McElwee also points out that: “Asda is centrally serviced from a distribution centre and these stores will be in relatively close proximity to existing stores, so servicing them won’t be that hard or costly.”
He adds that “manufacturers provide deals to put their products in the distributions centre – what price the retailer sells it out at is their choice.”
Is the convenience push enough to grow Asda’s market share?
For marketing consultant Andy Duggan, he says Asda is “on track to hit the second spot”, in overtaking Sainsbury’s in market share value.
Speaking of Asda’s previous involvement in convenience through EG Group’s On the Move stores, Duggan told Grocery Gazette, “they know convenience stores very well and they’re probably the most qualified brand in convenience store space.”
He says that now is a better time than any for the Big 4 grocer’s convenience push as “Morrisons is trying to offload locations, Tesco has not got any growth plans in more sites and so if they want to be in a strong position in three years time, they need to go through this hard work now.”
Currently, Asda stands as the third largest supermarket in the UK with a market share value of 14.3%, while Sainsbury’s sits slightly ahead at 14.7%. Since June this year, Asda has seen 0.6% growth, while Sainsbury’s has fallen by 0.2%.
In August, discount grocer Aldi overtook Morrisons in terms of market share and now sits as the UK’s fourth largest supermarket. It has also taken £170 million of sales from the likes of Tesco, Sainsbury’s, Morrisons and Asda within the past three months as It continues to grow its market share.
Although Aldi might not seem a huge threat at present – sitting at 9.3% grocery market share – its store opening plan is likely to see this jump significantly over the coming year or so, as its portfolio increases by 20%, taking it to 1,200 by the end of 2024.
The retail insights organisation IGD says the convenience channel is set to grow as shopping behaviour continues to normalise, helped along by investment from retailers improving and creating stores.
IGD director of retail analysis Caroline Myers says its grocery market forecast “sees growth for all retail channels. Through discount will naturally benefit from shoppers’ desire to save money, growth will be held in check by increasing competitiveness from other channels.”
While many shoppers have flocked to discount retailers to mitigate the added cost pressures of inflation, the figures forecasting the growth of the convenience sector are promising and for Asda, this move couldn’t come at a better time.
The launch of Asda Express will not only boost Asda’s current grocery market share, it will also create a larger margin between it and the grocery rivals slowly clipping at its heels. How successful Asda’s latest move will be is yet to be seen, but it is certainly one which Sainsbury’s will be watching very closely.
