The discount grocery sector is set to grow at a faster rate than the overall grocery market over the next five years, with total turnover for ‘hard discounters’ expected to almost double to £6.2 billion by 2010, according to the Institute of Grocery Distribution (IGD).
Since their arrival 16 years ago, chains such as Aldi, Lidl and Netto have made a modest impact in the UK, but ambitious plans for expansion and an increasing consumer desire for value goods will see their market share increase, the research body has predicted.
While typically catering for consumers on a budget, studies show the UK’s rising shoppers - “affluent urbanites, prosperous professionals and better-off executives” - are more likely to purchase more of their weekly shop from so-called ‘hard discounters’.
There has also been a general shift in the way consumers shop in the UK, with good value taking precedence over low prices. “Value is set to become increasingly important as consumer spending weakens in light of rising unemployment, higher oil prices and record levels of consumer debt,” one IGD report said. “This in turn will continue to drive the proliferation of discount formats across all retail sectors in the UK.”
Hard discounters currently account for just 5.1 per cent of the country’s total grocery market due to the impact of the leading multiple retailers, poor consumer perception and a failure to achieve scale, the report highlighted, but a “softer” approach to discounting, such as the introduction of leading brands and developing fresh food ranges, will see their share grow.
Aldi in particular is also looking to improve its market share with the introduction of ‘Specially Selected’ range, highlighting more upmarket goods.
Many discounters are also opening new, higher-specification stores in less downmarket areas as part of a drive to improve consumer perceptions of their product quality, and establish more mass-market appeal, the report noted.
Aldi has invested £500m in its expansion in the UK, bringing its store numbers up to an estimated 500 by 2010. Overall, IGD predicts that hard discounter store numbers will grow 56 per cent to 1,306 by 2010 - 154 new stores for Netto, 115 for Lidl and 200 for Aldi.
However, leading retailers such as Asda, which is launching a new store format named Asda Essentials, selling 95 per cent private-label goods, could provide some stiff competition, IGD said.
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