Global Convenience Store Focus

Discounters Win Scale in U.K.

Discounters are winning scale in the UK market and threaten c-stores and top-up shopping as much as supermarkets.

Those are the key conclusions of Nielsen’s Consumer Insight report, Shoppers Count on the Discounters.

Nielsen Homescan data for the 52 weeks to 19 April 2008 (update) gives total discounters a 5.1% share, closing ranks on the Co-op (6%) and ahead of Somerfield (3.7%) and Waitrose (3.7%).

“More consumers than ever are prepared to try this format of grocery shopping,” says the study. “Historically, discounters were poor sites with a limited range, appealing to less affluent households, but this has begun to change.”

The discounters are luring basket spend from all of the larger retailers, adds Nielsen.

Average basket spend is around £15 compared to the Co-op at £11, for example, and Nielsen reports it is increasingly seeing that discounters are not just being used for a top up shop.

However, due to the discounters’ limited range, shoppers still find it difficult to complete a full shop in store, and Nielsen expects to see further range developments.

Economic climate

Uncertain economic times are driving the switch. A stagnant housing market, inflation due to rising food and fuel costs and an end to the days of cheap borrowing mean consumers are feeling the pinch, says Nielsen.

In June Nielsen’s BRC Shop Price Index tracked food inflation at 7% year-on-year.

“That represents a step change in price rises and is contributing to changing shopping dynamics in the UK grocery market,” it says.

And it expects price to continue to be important for the foreseeable future with evidence that consumers are questioning their spending.

“We know that consumers cut back on grocery spending when money becomes tighter,” says the report.

Nielsen reveals that in a recent survey (April 2008) more than 75% of consumers admitted to saving pennies when buying groceries. This has shifted from 45% in October 2007, highlighting consumers’ growing need to tighten their belts.

According to Nielsen, this will encourage even more consumers to review their shopping bills, putting the discounters in a stronger position.

Widening discount appeal

The leading discounters, meanwhile, are broadening their appeal.

While they have traditionally attracted low-income families, the depth of ranges that are now available in store means are reaching out to a much wider demographic.

And, while store equity is still relatively low in the UK, compared to Europe (source: Shopper Trends 2007), the discounters are changing attitudes through improved store environment, ranges, quality and, in the case of Aldi, through sustained messaging communicating food quality at good prices.

Online discount buzz

Further evidence the discounters are gaining traction comes from an analysis of web site traffic.

Nielsen Online found a significant increase in interest in the discounters’ web sites between March and May 2008. Specifically, unique visits increased over 35% year-on-year to nearly 500,000.

Aldi and Lidl were the most popular web sites after the top three grocers.

Nielsen says this indicates more shoppers are curious about these retailers and are searching for information about them.

Nielsen Online research also found that within consumer generated media such as blogs and online review sites, the general buzz surrounding discounters indicates that while some continental products may require experimentation, they are worth trialing for the cost savings to be gained.

Future trend

Nielsen expects growth in the discounters to continue, not only fuelled by worries about the economy but through offering consumers more of what they want in terms of healthier more upmarket ranges and better store environments.

“The challenge will be to bring new shoppers into the format but with a troubled economic climate this could well be the time for the discounters,” it says.