Sales of non-foods by grocers like Tesco and Asda have boomed in the past five years, rising by 52% since 2003 to reach £20.4 billion annually. But now they are facing a tougher environment as consumer spending slows, out-of-town hypermarket space becomes more difficult to obtain and the ageing population means fewer family-age consumers.

Supermarkets are responding with new store formats like non-food standalones, new ranges and a major push to increase their home shopping sales. They are also taking on high street general merchandise rivals like Argos with their own catalogue businesses.

Sales of non-foods by grocers like Tesco and Asda have boomed in the past five years, rising by 52% since 2003 to reach £20.4 billion annually. But now they are facing a tougher environment as consumer spending slows, out-of-town hypermarket space becomes more difficult to obtain and the ageing population means fewer family-age consumers.

Supermarkets are responding with new store formats like non-food standalones, new ranges and a major push to increase their home shopping sales. They are also taking on high street general merchandise rivals like Argos with their own catalogue businesses.

The level of competition is increasing rapidly, with Sainsbury’s set to relaunch its own online offer and Morrisons also planning to develop its non-foods ranges. Meanwhile, the discounters are engaged in rapid store portfolio expansion, extending their penetration of the budget end of the market, threatening established players in the sector.

Key themes

Which areas of the market have the best prospects for future sales growth?

What impact will the development of home shopping by Tesco, Asda and Sainsbury’s have on the market?

What is the potential for the non-food only stores being developed by Tesco and Asda?

How can smaller players like Sainsbury’s and Morrisons build their non-food sales given the dominance of Tesco and Asda?

How might non-foods in supermarkets be affected by the recession?