Aldi, Lidl and rivals to thrive as UK discount retail market soars

Aldi store frontThe UK Discount Retail market is set to soar by 36.1 per cent by 2022, reaching £32.5 billion by 2022, according to research by GlobalData.

The company’s latest report UK Discounters 2017 – 2022 reveals discount retailers could gain an extra £9 billion slice of the total retail market as they become a more appealing destination for consumers looking for bargains as inflation continues to squeeze their disposable income.

“This will be good news for Aldi, Lidl and B&M Bargains, which dominate the channel, with a combined share of over 70 per cent of the discount retail market,” observed Molly Johnson-Jones, senior food and grocery analyst with GlobalData Retail.

DIY and gardening; health and beauty and homewares will deliver the strongest category growth. About 89.4 per cent of the UK population have shopped at a discounter in the last 12 months with food and grocery (F&G), non-discretionary household goods and health and beauty (H&B) the most popular product categories with shoppers.

“Our report findings confirm that discounters have done an exceptional job in gaining market share of frequently purchased items by changing the perception of discounter own label products in F&G while at the same time undercutting mainstream retailers on branded items in H&B and household. This combined approach has proven to be very disruptive in the market and has contributed to their success.’’

Food and grocery is the sector with the highest market value, worth £15.7 billion in 2017 and will grow to £21.8 billion by 2022 – taking away another £6 billion from the mainstream grocers.

“As perception and trust in own-label has been earned by the discounters in groceries, this is the sector which the mainstream retailers should be the most concerned about as the barriers to entry have already been overcome.

“Food and grocery has enjoyed strong growth over the past decade as even when incomes have been more pressured by inflation and lower real wage growth, people still need to buy the same amount of food. The F&G discounters have taken advantage of this by extending their range to cater for all consumer needs and growing their premium and fresh ranges to ensure that they can be a one-stop-shop for the weekly shop.”

GlobalData has forecasted DIY and gardening and homewares will grow 46.6 per cent and 42.6 per cent respectively for the period 2017 – 2022, as discount retailers gain market share from mainstream DIY retailers by offering consumers lower cost solutions for household maintenance and upgrades.

“Indeed, the rollout of larger out-of-town store formats has facilitated broader ranges, providing them with more authority in the home sectors,” said Johnson-Jones.

“Consumers are likely to perform fewer and smaller upgrades on their homes during the forecast period due to declining disposable income. This will benefit discount retailers homewares sales as they continue to improve their shopper appeal by increasing their range and incorporating greater trend influence – while ensuring affordability which is crucial for driving impulse and gifting purchases.

“The discounters have expanded their range in the DIY and gardening market at a time when consumers are seeking reduced cost solutions for doing up their homes and gardens – B&M will particularly outperform in this area as it adds garden centres to its retail estate over the next few years,” she concluded.

This article was first published on Inside Retail Asia.

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