Asda Takes On Rival Tesco With Help From Wal-Mart

In Britain, a price war has erupted among grocers rushing to capitalize on the demise of Woolworth’s. Formidable supermarket chain Asda seeks to knock non-food rival Tesco from the number one spot.

As part of an expansion of its non-food stock, Asda announced it will increase the volume of goods sourced through its US owner, Wal-Mart. The partnership with Wal-Mart will allow Asda to offer cut-rate prices on non-food items -- from candles to bedding -- challenging main competitor Tesco for market share. Asda already sources 40% of its goods from Wal-Mart.

Asda has increased its range of non-food products in direct competition with Tesco, rapidly expanding the number of Asda Living stores. “We want [to share] a lot more product with Wal-Mart, particularly in non-food. We will be moving towards that quite aggressively,” said Andy Bond, chief executive of Asda.

The Times of London expects the partnership to hurt rival Tesco. Wal-Mart’s buying power edges out Tesco’s with global sales that are "approximately five times greater than those of Tesco.”

Though Tecso's sagging sales rallied thanks to the short-lived success of its clubcard program, the brand has stumbled recently, losing market share to Asda and Sainbury's. The chain has also fallen short of its targets despite the efforts of a costly voucher program. Tesco is retaining a positive outlook as the holidays approach and shoppers seek out last minute gifts and groceries. The brand hopes the addition of a £20-a-month iPhone will also boost holiday sales.

In the long run, however, Tesco may be hampered by overextending its stock without having the benefits of Asda’s economies of scale.