Consumers are shopping at the discounters more than ever before. This has led to the market size increasing by 74.2 percent between 2012 and 2017 and will rise 34.4 percent during 2017-2022.
What people buy at the discounters is covering an increasing number of items, supporting an £24 lift in spend per head in 2017, so the discounters must keep up with range development. Food & grocery has the highest penetration of its respective market, with an 11.4 percent share in 2017. Consumers shopping for groceries at the discounters have become the norm, and growth will continue as ranges expand, on-trend offers improve, locations increase, and the shopping experience advances.
Categories which are the most successful in terms of sales for the discounters are high frequency purchase categories such as food & grocery and health & beauty. These FMCG items have been easier categories for the discounters to penetrate due to their lower selling prices, short replacement cycles and essential nature – driving volumes and impulse purchases. Average transaction value at the grocers is low, with average spend highest at Aldi and lowest at Poundland.
Instore experience in discounters as growth barrier
Discounters must not compromise on customer service as while 65.7 percent of discounter shoppers are willing to overlook the instore experience of a discounter; over half of shoppers (55.6 percent) think that discounters should offer good customer service. The perception that discounters offer low quality, small and inconsistent ranges, and a negative shopping experience has been a consistent barrier to growth.
While not having a store nearby is the main reason consumers do not shop at discounters this is being addressed through rapid store expansion plans. Discounters therefore need to focus on the other key barriers to growth such as not being able to do a full shop at the discounters (28.9 percent), and not enjoying the instore experience (23.3 percent).
Categories with potential for increasing sales
The discount market is set to grow 36.1 percent between 2017-2022e, rising to £32.5bn from £23.9bn. Strong growth has been driven by the discounters evolving to appeal to the broader consumer, aggressive geographical expansion, diversification of range, and improved in-store experience. Discounters that can appeal to a broad consumer base without alienating its core customer will command the greatest discount market share.
Clothing & Footwear presents a new growth opportunity for the discounters. At the moment, the discounters only command 0.6 percent of the clothing & footwear market, and with the predicted decrease in consumer spending it is likely that general retail clothing sales will decrease, thus leaving consumers looking for somewhere to obtain cheaper clothing. The discounters could become that destination if they develop on-trend ranges which appeal to consumer needs.
DIY & Gardening will benefit from consumers trading down to do their essential home maintenance; homewares will benefit from impulse purchasing and gifting as well as consumers seeking to buy small luxuries where they can; and Health & Beauty will grow due to the discounters' ability to provide branded products at a lower price. Although, the latter will be challenged in the future with inflation eroding margins.
The report "UK Discounters 2017-2022", provides comprehensive insight into and analysis of the UK discount retail market, the prevailing trends, hot issues, consumer motivations, strategies for success, and opportunities for future growth. Consumer data is based on a discounter survey using a panel of nationally representative shoppers.