According to a new report by strategic research consultancy Allegra Strategies, hard discounters, such as the German chains Aldi and Lidl, are set to double their share of the UK grocery market from 5% now to a projected 10% over the next decade.
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Allegra predicted that the hard discounter store format will be the grocery sector’s fastest growing distribution channel over the next five years. The research company forecast that accelerating store expansion will see overall sales grow by 86%, or GBP2.6bn (US$4.8bn), over the 2005-2010 period to reach GBP5.6bn.
Allegra attributed this growth to the adaptive retail thinking tailored to the UK market that German hard discounters are increasingly adopting – the results being encouraging sales growth, market share gains and improving profitability. An upshot of this improved performance is the confidence Aldi and Lidl have gained to significantly expand their UK operations.
As hard discounters become more significant to the overall grocery sector, Allegra said: “suppliers will find the growth prospects difficult to ignore and more brands will be introduced and this will strengthen customer choice.”
Likewise, supermarkets will have to respond by strengthening their perishable offers, developing more segmented customer appeal and targeting non-food offers more aggressively, the report suggested.
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By GlobalDataThe author of the research report, Steve Gotham, said: “We are now seeing the emergence of ‘second generation’ discounter stores. Perishable ranges are being extended and more branded and premium lines are being offered in larger, better-equipped stores that provide improved shopping experiences. This softening of the retail proposition is increasingly making the original ‘hard discounter’ label redundant. And in the process, it is leading to more consumers re-appraising their former, largely ‘downmarket’ store perceptions.”
