By Clare Matheson BBC News business reporter

Supermarkets now allow people to shop for food and decor

Non-food sales at supermarkets are expected to overtake those at department stores this year, research suggests.

According to Verdict Research, supermarkets generated non-food sales of �13.5bn in 2004 - just �1bn behind that of department stores.

That fact marks the relentless rise of the supermarket, so much so that almost half of the people reading this will have bought an item of clothing from a supermarket this year.

But why are the so-called big four - Tesco, Asda, Sainsbury and Morrison's - branching out of the food market?

"In terms of growth potential, it's a really good proposition," says Teather & Greenwood retail analyst Sanjay Vidyarthi.

"Competition worries are concentrated on food, so it also allows them to bypass competition issues," he adds.

While the food market is pretty much saturated and prices are as cheap as they can be, non-food goods offer the chance of higher prices and so higher margins.

Higher numbers

Supermarkets also have "traffic" - large numbers of shoppers popping in for their weekly shop.

And having everything under one roof also means shoppers can be lured into impulse-buying of CDs, DVDs or toasters.

"Non-food sells at a higher price and demand for it is growing faster - particularly, for example, in electrical goods," Nick Gladding, Verdict retail analyst says.

SUPERMARKET SALES SHARE* CDs - 26.8% in year to 8 January 2006 (15.2% five years ago) DVDs - 27.4% (12%) Books - 11.9% (6.9%) Computer games - 12.2% (5.4%) Clothing and footwear - 19% (11%) *SOURCE: TNS Worldpanel

Non-food is such a growth area for supermarkets, that sales in the sector jumped 94% over the past five years, well outstripping the 11% growth seen in the overall market.

The latest report from TNS Worldpanel shows that more than a quarter of CDs and DVDs are now sold at your local, Tesco, Sainsbury or Asda.

Concentrating on non-food also allows supermarkets to stick to their so-called "80-20 policy" - making 80% of their profits from 20% of their sales. Those profits can then be ploughed into price cuts on groceries.

Tesco - with its huge land bank - is leading the pack, experts say.

"For Tesco, two-thirds of the space it's putting on is non-food. Its Extra formats are now half food and half non-food. With any store extensions, most of the space is non-food," Mr Vidyarthi adds.

Expansion plans

But its rivals are having to look elsewhere to expand their choice of goods.

Asda has opened up five non-food stores in the past four years, and as the move has been so successful, it is rolling out another five this year.

We're just trying to have a flexible approach across different formats Asda

First to open will be its Living store in Glasgow this spring - selling clothes, electricals, homewares, lights, CDs, DVD, computers and even jewellery.

"We're just trying to have a flexible approach across different formats," says a spokeswoman.

"We would be the first to say we've not been as flexible with new store formats - the market has changed in the last few years.

"Now we're putting our foot on the accelerator to give customers what they want," she adds.

Asda also says that by placing its Living stores in retail parks, it also manages to attract new customers that would not usually visit its superstores.

Hurdles

But experts disagree, arguing that planning restrictions have forced Asda to look elsewhere.

"I think the reason for Asda's move is site availability and planning permission," says Mr Garner.

Supermarkets are switched on to the profits non-food generates

"It can't get sites so it's better to get defunct High Street sites from places like Woolworths and refit them."

As supermarkets gobble up an even greater share of the overall retail market, how are rival businesses faring?

The Office of Fair Trading is clearly concerned and has now signalled its intention to ask the Competition Commission to investigate the grocery market.

Market pinch

Many retailers have blamed the rise of the supermarkets for the tough times they are currently experiencing. For example, Boots says wider availability for off-the-shelf medicines has caused some of its recent problems.

Meanwhile, entertainment retailer HMV says increasing competition from supermarkets was one of the reasons behind its poor performance at Christmas.

Fashion chain Next and cut-price retailer Matalan have been bemoaning a drop in sales, while on the DIY front, B&Q has been losing sales.

Supermarkets are trying to gain another pound of your spending Jonathan Pitkanen, analyst

So could the current inquiry into grocery sales be widened to take in the non-food arena?

Nick Gladding, analyst at Verdict, believes the threat supermarkets pose to the High Street is "quite real".

"So far Asda has been cautious about developing its non-food sites as it has been constrained by a shortage of suitable sites and other investment priorities," he says.

"If Tesco decided to take over another retailer, or open a smaller non-food store, there would be concern."

Research by Verdict shows that Tesco now sells more non-food than M&S.

But while experts predict a more competitive non-food market, they do not expect the Competition Commission to launch an investigation into the issue in the short term.

"We'll probably see a split, with them creaming off volume in mainstream goods and other stores moving into more specialist services," says Mr Garner.

Already, Boots is concentrating more on fragrances and specialised skincare than on toothpaste and soap, while in the electrical world, large out-of-town Currys stores focus on higher-priced computer and home cinema products.

'One-stop' catch

But Fitch analyst Jonathan Pitkanen has a word of warning for supermarkets planning to widen their reach.

"There's a catch with the "one-stop shop" idea where you buy all of your goods - food, DVDs, underpants.

"It defeats that objective if Asda or Tesco or Asda open a non-food store, it's a bit confused."

HMV has suffered as supermarket sales have soared

He adds that all stores seem to be moving away from their core products. Next also sells homewares and M&S even opened its own �14m homewares Lifestore shop in Gateshead, although that shop closed down within a year of opening.

Also, smaller sites in town centres means spreading your supply chain and deliveries over a wider area, leading to higher costs.

"Supermarkets are trying to gain another pound of your spending, they just want more and they have to expand to do that."

To expand, he expects supermarkets to concentrate on opening up more convenience stores, before any watchdog steps in. Stores had opened up mezzanine floors in their superstores until regulations halted such practices.

"Everyone's at it, even Somerfields and the Co-op are all getting rid of supermarkets and moving into convenience stores," he adds.

"The only other way to expand would be to reinvent the way people shop - or get out of the country."