Head of Asda’s clothing business Anthony Thompson intends to make George the UK’s biggest clothing retailer by 2011. James Thompson learns how he plans to get back on track
The boss of Asda’s George clothing business, Anthony Thompson, last week revealed one of the most ambitious goals any retailer is likely to set this year.
Thompson, a former Marks & Spencer director, is determined that Asda leapfrogs the mighty Tesco and Primark – along, of course, with his former employer – to become the UK’s biggest clothing retailer by volume by 2011.
He acknowledges that to reach that Holy Grail George will have to ramp up sales massively. “Over the next three years, if we were to achieve our goal, we will need to deliver about£400 million to£500 million in sales growth,” says Thompson.
George is also gunning to overtake Tesco to become the grocery sector’s biggest retailer of clothing this year. “The business has continued to grow,” he says. “The issue for us is that the market has continued to grow and our market share flattened off and began to slow.”
Never mind such formidable competitors, a key problem is that Thompson admits George has lost it way in the past three years. “The business is not broken, but it has certainly stalled a bit,” he says.
So what went wrong, how does Thompson intend to improve things and what do industry experts believe are his chances of making George the top dog in clothing in three years?
The straight-talking Thompson says George lost direction for numerous reasons – notably by over-complicating its business. He says it also focused too much on younger customers, had a confused brand offer, poor availability on fast-selling items and did not define its offer clearly in stores.
He says: “We think we made what was essentially a very simple, high-quality business a bit more complicated than it should be. We have made our ranges, store layout, price architecture and promotional activities too complicated – we have made it a really complicated business to run. By making it more complicated, we have made it less productive.”
Significantly for George’s bottom line, productivity – measured by sales and profit per square foot – has declined. Thompson says that new space, whether in existing stores or in extensions, has outpaced sales growth. Distribution costs have also outstripped sales growth, he adds.
George brand director Fiona Lambert says there are myriad reasons for its lower-than-desired productivity in recent years. For instance, there have been too many sub-brands, mark-down promotions and range changes. She says: “There was too much change of range. There would be new ranges every four weeks. The stores were constantly moving around stock and being left with stock.”
George’s promotions have also been doing a poor job of matching demand. Last year, it sold out of a£15 dress in one week instead of three weeks and ran mark-downs for 49 out of 52 weeks, says Lambert.
Above all, George’s sub-brands illustrate how it took its eye off the ball and where it intends to generate a large chunk of its recovery – notably by winning older customers. In womenswear, for example, there were five sub-brands, three of which were aimed at younger, more fashionable customers.
This month, George revealed that it is to drop its Fast Fashion and Must Have sub-brands, as part of a considerable simplification of its offer. Instead, the clothing retailer will focus on four central brands: its core George range, young fashion brand G21 and two new brands: Moda at George and Boston Crew.
The two new brands, which Thompson believes will account for 20 per cent of George’s overall clothing sales by 2011, will target the over-44s with more upmarket products. “We have introduced new sub-brands with a slightly more classy customer in mind,” says Lambert.
In addition to the older age group, George has also been losing customers in the 25- to 44-year-old bracket. “There is a big opportunity for us in the 25- to 44-year-old gap. That is definitely where we are missing sales. They want a lower priced Next and M&S and not necessarily Primark,” says Lambert. She has vowed to improve overall product quality in terms of fabric, fits and value for money.
Lambert says that George has massive growth potential across its categories, from clothing staples, such as socks and pants, to jeans and childrenswear, for which it launched a TV ad campaign last week. On jeans, Lambert says: “The potential is incredible. There is massive growth for us in jeans this year.”
Overall, Thompson agrees that George’s prime objective is to get its product right. “We are not going to get anywhere without a fantastic product that our customers want,” he says. “We want to get a better balance of product for our customer segments.”
But he stresses that George will keep a tight grip on its value credentials. “We also need to ensure we keep a razor-like focus on value. That is not just opening price point – we have to have fantastic value available at better and best as you go through the price architecture,” says Thompson, who declined to comment on any international plans for Wal-Mart’s £2 billion George business. The clothing is sold in seven countries outside the UK.
Product improvements should help Thompson achieve his number-one goal: persuading a greater proportion of the 15 million customers who shop at Asda weekly to add George clothing to their basket.
Thompson admitted that only 20 per cent of transactions at Asda’s tills include a George item. “65 per cent of our customers say one of the reasons they come to Asda is because it contains George,” says Thompson. “We have 15 million customers a week coming into Asda. Our conversion rate is not high enough – we do not convert enough of them to become George shoppers,” he says.
Verdict lead retail analyst Maureen Hinton says convenience is critical for customers who buy clothes at supermarkets and often have limited time or children hanging on their coat-tails. “The problem for all the supermarkets is that they try to put too many lines in and do not make it enticing enough for customers,” she says. “When you are shopping in a supermarket, you are in a different mode to when you are on the high street.”
Partly recognising this problem, Thompson and his team are overhauling George’s in-store presentation to create a cleaner, more attractive, shop-in-shop feel. “We will convert more Asda shoppers by getting the product right, simplifying the store layout and making it easier to shop, with clearer and simpler promotional strategies that are not complicated and very convenient for our customers to buy,” says Thompson.
Perhaps surprisingly, Thompson does not want more space inside Asda’s supermarkets. He thinks that a sizeable proportion of the additional£500 million in sales George will have to generate over the next three years will come from new channels, notably through the non-food Asda Living stores and the launch of clothing online on Asda’s web site. “There is definitely more opportunity in more space through Asda Living and dot.com,” says Thompson.
Last week, Asda chief executive Andy Bond said that the grocer will double the number of Asda Living stores – which measure 20,000 sq ft typically – to about 26 this year. More significantly, Bond sees the potential for 200 Asda Living stores, which sell a high volume of clothing.
However, some industry observers believe it would make sense for Asda to acquire an out-of-town retail rival to hit its 200 target, rather than to expand organically. Retail Knowledge Bank senior partner Robert Clark says: “There is always the possibility that, at a stroke, Asda could solve part of its problem by acquiring the entire chain of Matalan – Matalan has to be on the horizon.”
The other big opportunity for George is the launch of its transactional web site later this year. Thompson declined to say how much clothing it will sell, but hinted that it would be a hard launch.
He also vowed that George’s online channel would be profitable fairly quickly. “I believe we can make it profitable in a much shorter time frame than five years,” insists Thompson.
Despite Thompson’s gusto and the wide-ranging changes he has instigated, including substantial investments in the business’ technology infrastructure, industry observers are sceptical that George can capture the number one clothing spot by 2011.
Hinton believes George faces much fiercer competition than when it launched in the 1990s. “It has a challenge on its hands because there are more powerful players than when it led as first mover in the market,” she says.
Clark agrees. “If I was a betting man, I would bet against it achieving its goal by then – unless it makes a significant acquisition sooner rather than later,” he says.
Thompson is undaunted by the consumer downturn, which he believes plays to George’s strengths as a value brand. “It is clear we are entering tougher times. I think we are getting close to how we felt in the early 1990s,” he says. “The market is going to stretch a lot of people. We have the advantage of people coming in to buy food.”
However, George is likely to find that, between now and 2011, the battleground of the value fashion sector will remain full of formidable combatants.
Thompson says: “It would be outrageous to suggest that the growth of Primark, Tesco entering the market in the way it has and M&S repositioning on price has not affected George – of course it has.”
Yet he remains resolute that he can meet his target. Battle has commenced, and it is likely to be bloody.