Bargain Stores Booming As Consumers Shift Spend Away From Supermarkets And Health & Beauty Retailers

New data released by Nielsen shows that Britons now spend nearly £5bn a year at bargain stores, 17% more than a year earlier. It also reveals that 31% of the increased spend at chains such as Poundland, B&M and Home Bargains can be attributed directly to spend being shifted away from the supermarkets and health & beauty retailers.

According to the Nielsen retail performance data, British households spent over £4.9bn at these bargain stores in the year to July. Over 2.2 million households bought from a bargain store for the first time during the last year, meaning 78% of households in Britain now shop there. Over half (52%) of British households purchased from Poundland alone. Together, bargain stores are more popular than the discounters Aldi and Lidl, who are visited by 75% of households.

“The rising spend at bargain stores is driven by two things,” said Mike Watkins, Nielsen’s UK head of retailer and business insight. “The huge rise in first-time visitors and, more importantly from a long-term perspective, shoppers buying a larger repertoire of products from bargain stores – some of which they previously bought from mainstream retailers.”

The growth in sales has also been driven by bargain stores moving beyond just the £1 price tag – almost 1 in 4 items cost more – which Watkins said, “resonates well with shoppers because removing the £1 ‘straitjacket’ allows stores to offer good value across a much wider range of products, which makes for bigger baskets and more expensive trips.”

What are people buying?

Among everyday grocery items purchased at bargain stores, Household, Packaged Grocery, Confectionery and Health & Beauty are the most popular, accounting for 63% of bargain store grocery sales.

“Historically, shoppers visited them for household goods and other general merchandise, the type of ‘safe’ non-perishable categories that new shoppers initially limit their repertoire to,” said Watkins.

However, fruit & vegetables have seen the biggest rise in popularity, albeit from a small base, over the last year in terms of number of shoppers and frequency of purchase. He said: “People are starting to visit for their regular grocery staples and more experienced bargain store shoppers are becoming interested in adding fresh produce to their repertoire. This is similar to what we saw some years ago with Aldi and Lidl who initially attracted shoppers with special buys for non-food items and low prices on groceries.”

Shifting spend

Around 31% of the increased annual amount Britons spent at bargain stores came from people shifting spend away from supermarkets and health & beauty retailers. The top four supermarkets are the most affected by this switching, accounting for 73% of spend shifted away towards bargain stores.

Bargain store hunters are more likely to shop around and use a greater range of stores than the average shopper in an effort to find the best prices. Watkins said this stands bargain stores in good stead as “their strong value-for-money proposition means they’re well-placed to continue to win market share, particularly as they continue to open new stores in retail parks and on the high street, and if Brexit turns out to affect purchasing.”

The figures come from Nielsen’s Homescan data which measures purchasing among 14,500 households – people scan the items at home they buy in shops.

NAM Implications:
  • Breaking out of the £1 restraint, morphing into a good value, low cost brand has been a major gain for the bargain stores…
  • Managing to optimise the fresh/wastage relationship might prove demanding…
  • Either way, branded suppliers have to find ways of optimising this growing route to consumers.