Discounters remain key part in retail growth

By Laurence Gibbons contact

- Last updated on GMT

The grocery market is set to grow 13% to £200.6bn
The grocery market is set to grow 13% to £200.6bn

Related tags: Supermarket, Wal-mart

Hard discounters will remain a key feature in the UK grocery market, estimated to grow 13% to £200.6bn by 2020, despite predictions their growth could be about to fade.

Discount retailers – Aldi, Lidl and Netto – are estimated to grow by 82.2% between now and 2020 from £12.8bn to £23.2bn, according to the data from grocery think-tank IGD.

This upbeat assessment follows predictions from Shore Capital that Aldi and Lidl could be on a path to destruction.

The discount market has grown in value by 106.9% over the past five years, according to IGD data.

The IDG’s chief executive Joanne Denney-Finch said food discounters had enjoyed remarkable success over the past few years.

“One in nine shoppers (11%) told us they used discounters for the majority of their grocery shopping last month, compared to just 3% who said they did in 2010,”​ she claimed.

Maintain strong

“We expect the discounters to maintain strong momentum and open many more stores, including in more affluent areas. However, we do expect growth to be harder won as the pool of best locations gets smaller and the major supermarkets fight back.”  

It was a testing time for food retailers with low prices and a boom in outlets, Denney-Finch added.

However, the market could look forward to continued growth over the coming years, the said.

“The unprecedented food and drink deflation across a broad range of categories means, however, that growth is slower than anticipated,” ​she said.

Online sales are the fastest growing part of the market and are predicted to double in value by 2020 to £17.2bn, according to the IGD.

Retail growth by market 2015–20

  • Online: 92.9%
  • Discounters: 82.2%
  • Convenience stores: 17%
  • Small supermarkets: 0.9%
  • Superstores/ hypermarkets: -2.9%
  • Other retailers: -2.3%

(Other retailers include: confectionery, tobacco, news, specialist, food sales from mainly non-food retailers and street markets)

Record number for online

A record three out of 10 (28%) of consumers said they shopped online for their groceries last month, compared to 22% in 2010, Denney-Finch said.

“People are making the most of new devices, faster connection speeds and more click and collect points,”​ she said.

“Over the next five years, online will remain the fastest growing grocery sector, although we expect the rate to moderate slightly as retailers refine the model and put more focus on encouraging shoppers into stores.”

Convenience stores will remain the third-fastest growing grocery sector.

These stores were faced with the challenges of finding ideal new locations and rising competition from other formats, including the discounters, for top-up shopping, Denney-Finch said.

Despite this, they are the most used type of grocery format, she added.

Superstores and hypermarkets will experience a modest fall in sales by 2020 but will still be the biggest slice of the grocery market.

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