Whilst the pandemic has led to a significant improvement in sales performance at the Big Four supermarket multiples, new research highlights that it has also been another year of success for the food discounters with their sales on track grow 11% in 2020.
By the end of the year, Mintel predicts shoppers will have spent an estimated £24bn at discounters, mainly Aldi and Lidl. The researcher is also forecasting that the channel’s sales will top £31bn in the next five years, an increase of almost 30%.
The strongest players in the food discount sector, Aldi and Lidl, account for around 67% of the discount market (including food and non-food) and 13% of the total UK grocery market.
Mintel found that 86% of British consumers shop at a food discounter, rising to 90% of 16-24s. Driven by more than just value, only 28% of discount shoppers agree that prices are more important than quality. Meanwhile, just over a fifth (22%) agree that having more money would make them less likely to shop at discounters.
In October this year, Mintel did research that found that nearly a quarter (23%) of consumers in the UK were shopping locally more often since the Covid-19 outbreak. The convenience of food discounters was supported by over half (52%) of consumers who also said that they like the smaller range available at discounters because it allows them to shop more quickly.
Piers Butel, Retail Analyst at Mintel, said: “Food discounters have managed to successfully carve out a unique niche in the market and are well-positioned to benefit from the economic uncertainty caused by the Covid-19 pandemic. In fact, it was during and immediately after the 2008 recession that the discounters started to grow in the UK and capture market share from the traditional retailers.
“The food discounters have been immensely successful at communicating their value proposition to consumers over the last decade. The combination of low prices, good value, and a simple shopping experience has proven very popular with customers. Their famous brand-beating luxury items may garner the headlines and attract new shoppers, but it’s the streamlined range, simple shopping experience, and good value that keep those customers loyal. While the Covid-19 pandemic represents an unprecedented challenge for UK retailers, we expect the discount market, with its focus on value, to benefit from these challenging times.
“In recent years we have seen the food discounters increasingly blur the line between discounter, convenience store, and supermarket. This drift into a more mainstream convenience position with, for example, the launch of smaller format Aldi Locals, may prove to be a positive move in the current climate. With many consumers in the UK working from home, shopping locally more often and keen to reduce time spent in stores, discount stores located in or near residential areas may benefit from increased custom.”
While online grocery shopping has surged during the pandemic, few leading discounters offer online shopping. According to Mintel research, as many as three quarters (74%) of discounter shoppers do not shop at discounters online.
Butel commented: “Consumers turning to online shopping as a result of the pandemic is the trend most likely to negatively impact discounters. The question for the future is how will the discounter business model, which values simplicity, grow to include full online retailing – which is both complicated and expensive?
“We believe that the shift to online is here to stay for the long term, so over the coming years we expect more discounters will start to offer e-commerce options, even if they start off limited in scope, much as Aldi did. But until this happens, the more traditional retailers will have an advantage over the discounters in the digital market.”
NAM Implications:
- “The combination of low prices, good value, and a simple shopping experience has proven very popular with customers”
- Says it all, really…
- But sharp-eyed NAMs will want to factor in:
- Increasing competition between Aldi and Lidl, especially as Lidl edges past?
- The competitive advantage of home delivery?
- Impact of ‘newer’ kids on the block: B&M, Homebargains and the pound shops..?
- Forecasting issues within the next unprecedented years?
- All beg the question of whether the discounter trend is worth a bet with your career?
