Asda launches non-food arm to take on Tesco and Argos

LONDON (Reuters) - Asda, the No.2 grocer, has launched a non-food arm, Asda Direct, selling products ranging from clothes and furniture to power tools and toys to compete with rival Tesco and Home Retail's Argos.

The move marks the latest advance by supermarkets out of their traditional market of selling groceries and into mostly higher-margin non-food items. It will pile extra pressure on smaller household goods companies, which are already struggling as cash-strapped shoppers cut back on discretionary spending.

Asda, owned by the world's biggest retailer, U.S. group Wal-Mart, said the "soft launch" on its website offered approximately 10,000 products and was accompanied by a 600-plus page catalogue that will be placed in stores in the coming days.

Customers are initially able to order products online for home delivery. A store collection service and in-store kiosks will follow.

Tesco, the biggest retailer, launched Tesco Direct two years ago and now sells around 12,000 products online and around 7,000 in its catalogue. It has 233 kiosks within stores.

Argos, the largest household goods retailer, sells about 18,000 products through its 1,800-page catalogue and around 700 stores.

(Reporting by Mark Potter; Editing by Erica Billingham)