How new discount grocery chains are changing UK retail scene
Quickly growing into a “sizable force” in the UK, the discount grocery market is a “fertile opportunity” for discounters to adapt to shopper needs, according to findings from global market research organisation Nielsen.
According to Nielsen, at the end of 2012, Aldi and Lidl, the two German-based discount supermarket chains that have a dominant foothold in the space, had a combined 7.7 per cent share of the UK’s fast-moving consumers goods (FMCG) market. Given recent growth, Nielsen said Aldi and Lidl appear poised to push that level to 10 per cent by 2015.
Discounters will stick around
Before the Great Recession of 2008-09, Nielsen said discounters struggled to impress the UK consumer. As the economy worsened and shoppers found their way to Aldi and Lidl to save money on their weekly food bills, Nielsen said consumers were “pleasantly surprised” to find that the discount retailers offered quality food at discount prices.
Now, as current trends suggest that economic growth will be slow for the next three years, Neilsen said shoppers have become used to living on less. According to Nielsen, these market conditions will favour the limited-range discounter business model, which includes sotres of 7,000 to 10,000 square feet with stock of approximately 1,000 SKUs.
However, both Aldi and Lidl have adapted to the UK marketplace by opening stores in more affluent locations and offering new options like fresh and chilled products. They have also embraced the premise of communicating about quality and value.
Nielsen said this strategy has been largely successful. In the last five years, Nielsen found that Aldi and Lidl had increased their penetration of all households to 45 per cent from 36 per cent, and the spend-per-visit increased to £19 from £15.
According to Nielsen, shoppers are also finding that Aldi and Lidl meet more than just their basic grocery needs. In response, consumers are buying more items, which attributed to 28 per cent growth in the two companies’ 2012 FMCG sales, far more than they would have garnered from new stores alone.
Points of differentiation
Nielsen said the discounters currently pull in most of their sales from their own private labels, which may have lower price tags than comparable products at many supermarkets. But UK discounters also hold regular promotional events and special one-off deals, which attract sales from consumers that are not opposed to shopping around.
However, the companies are not relying on their promotions to secure long-term and consistent results. Nielsen said recent trends suggest that UK discounters are appealing to the everyday needs of shoppers by offering value on everyday essentials and by being conveniently located.
“Value retailing” poised for a bright future
Nielsen said that together Aldi and Lidl have created an established trade channel in the UK, and highlighted strategies for success in a low-growth environment. Long term, Nielsen said the winners in the discount space will be those that innovate and take share from weaker players.
According to Nielsen, “no retailer can afford to stand still”, and that the discounters are set to expand their presence – not just geographically and in store numbers, but also in diversity and scope. Nielsen said possibilities include offering fresh food categories, attracting more families, communicating provenance, and adopting digital strategies and maybe even online shopping.
Discount grocery retailers in Australia
Meanwhile, Australian Food News recently reported that Aldi continues to make its mark in the Australian supermarket environment, with research showing that the discount retailer enjoys the highest customer satisfaction rating of all the supermarkets in Australia.
A German beverage company is launching the world’s first gluten-free barley-based beer. The gluten f...
Agricultural giant Monsanto has rejected US $62 billion acquisition bid from pharmaceutical and chem...
The recent acquisition of the Dollar Shave Club by Unilever may signal a new era in business models.
A drink which alters the way the body generates its energy has increased the performance of cyclists...
A conveyancing firm has found the opening of a new Aldi supermarket in the UK can drive up nearby pr...
A study has found those with the ‘obesity gene’ can lose weight through diet, exercise and medicatio...
The A2 Milk Company this week announced it has already brought in AUD $148 million of revenue for t...
Hong Kong consumers will soon be tasting Western Australian grown Granny Smith apples thanks to a WA...