Discounters and private label surge in recession

Discount and convenience boundaries are blurring

As recession bites, discount retailers and sales of private label ranges are gaining ground across Europe.

Those are two of the key messages from an interactive workshop session held during the Insight/NACS Global Convenience Benchmarks event in Dublin last month (March).

Presenting the latest market research, Greg Hodge, senior analyst at Planet Retail, said shoppers were trading down across the board.

Hodge: shoppers are trading up and down

“Shoppers are trading down when they shop and people are falling out of the top tier,” he said. In the UK, Waitrose and Marks & Spencer are the casualties of this trend and Aldi and Lidl are the beneficiaries, said Hodge.

However, he also described a ‘trampoline effect’ with shoppers bouncing back up to buy in mid-market retailers such as Sainsbury’s, who is performing well.

Across Europe, discounters are the third largest channel but the fastest growing, said Hodge. Convenience, meanwhile, is in third place in terms of growth and is increasingly in competition with discounters for retail space.

Hodge told delegates discounters were similar to convenience retailers in many respects: they both operate from small stores with a limited number of skus and have less of an emphasis on fresh foods. Hodge also highlighted the differences: c-stores focus more on major brands, are considered to be more expensive and have longer opening hours.

However, he said there was a blurring of the boundaries and c-store and discount expansion is focused on similar markets across Europe including the UK, Poland, Ireland and Germany.

Hodge presented recent examples of discount formats with convenience tendencies. They include Aldi’s store in Manchester, which has two entrances – one into a car park and one into the city centre. It sells smaller pack sizes, fresh food and food-to-go plus newspapers.

“It represents a clear step into the convenience market,” said Hodge.

Similarly, Carrefour is extending its Dia discount format, which features a strong private label range and convenience offering, from Spain into France. Back in the UK, Lidl is competing with convenience stores on the high street in Edmonton, London. Its store, initially branded as Lidl Express, offers convenience products such as meal deals, soft drinks plus in-store bakery.

At the same time, leading retailers with convenience outlets such as Tesco and Waitrose are developing private label ranges to compete with the discounters, said Hodge.

Waitrose has launched Essentials, while Tesco has unveiled an extensive range of discount labels.

Hodge forecast shoppers will continue to move up and down market. Private label will increase at convenience stores and manufacturers can service the channel via one-off pack sizes, he said. Discounters, meanwhile, will extend into other non-food segments and will further broaden their appeal.

“Delivering a unique offer will be crucial for convenience retailers,” Hodge concluded.