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Discount Retailing in the UK | Verdict Channel Report

Summary

UK discounters were the winners of the downturn, with expenditure growth of 89.1% between 2010 and 2015. However, discounter volume and expenditure growth is slowing due to fewer space opportunities and attracting new shoppers becoming harder, with total market growth between 2015 and 2020 more than half that achieved between 2010 and 2015.

Key Findings

  • Market issues are examined; space, impact of and to grocers, private label, multichannel and international opportunities; to inform decision making
  • Use our regional and location store data to identify and invest in underserved areas of the UK and lucrative store formats
  • Choose which product sectors to prioritise and grow based on 2015 and 2020 sales forecasts across six key sectors.
  • Use our market share data to analyse which players are struggling, enabling you to strategise for the future and gain competitive advantage.
Synopsis

The market will start to mature following rapid growth between 2005 and 2015, having won most of their new customers throughout the downturn, meaning that those who wanted to trade down will already have done so. The challenge for the discounters in the future will be in driving like-for-like sales, making professionalisation of the channel vital.

The grocers and non-fixed price discounters will capture an even bigger share of the discounters market over the next five years, with 58.2% and 27.8% shares of the overall market, respectively, in 2020. The grocers’ growth is driven by Aldi, but Lidl’s expansion and Netto’s return to the UK market will contribute to the rise.

Consumers have traditionally favoured discounters for deals on branded goods across food & grocery and health & beauty and while these remain the largest segments driving footfall to the discounters; it is the home sectors which will make the greatest gains in the next five years, benefited by the recovery in the housing market.

Reasons To Buy
  • Who are the top performing discounters in terms of UK turnover and market share, and what are their strategies?
  • Will consumer preferences start to change as the economy recovers and how should discounters adapt?
  • What part will inflation and volumes play in discounter growth in the next five years?
  • Can ecommerce become a viable channel for discounters, and how can they achieve this?
  • What UK regions remain underserved by discounters and what issues must be considered before store rollout?


  • Overview
  • Outlook
    • Winners of the downturn
    • Volume growth defies total retail trend
    • Food & grocery makes greatest gains, though share slips from 2014
    • Permanent shift in shopper mind-set protects future growth
    • Driving like-for-like growth will be essential
    • Range expansion needed in home sectors
    • Investing in private label will improve destination appeal
    • Space opportunities remain
    • Lidl loses share of discounter market
    • 99p Stores acquisition to boost Poundland
  • Recommendations
    • Drive l-f-l growth
    • Penetrate the south of the UK and OOT locations
    • Discounters must be ready as grocers continue to react
    • Increase destination appeal via private label
    • Must have ecommerce presence to maximise potential
    • Expand into Europe as domestic market matures
  • Market Size
    • Market definition
    • Discounter expenditure
      • Growth drivers of the UK discounters market
      • Volume growth driving discounter expenditure
        • Table Discounter sales (£m) and year-on-year change (%), 2005-15e
    • Aldi and Lidl drive the market
    • Food versus non-food
      • Specialists success drives food growth
      • Food & grocery share slowly falls from 2013
        • Table Discounter food & grocery sales (£m) and year-on-year change (%), 2005-15e
      • Non-food becomes more important among the discounters
        • Table Discounter non-food sales (£m) and year-on-year change (%), 2005-15e
    • Sector segmentation
      • Food & grocery fastest growing sector
        • Table Discounter sector performance (£bn), 2010-15e
        • Table Discounter sector performance year-on-year change (%), 2010-15e
      • Food & grocery
      • Health & beauty
      • Homewares
      • DIY & gardening
      • Toys
      • Books, news & stationery
      • Other
    • Spend per head
      • Spend per head grows £162 in five years
  • Market Forecast
    • Market definition
    • Discounter expenditure
      • Growth drivers of the UK discounters market
        • Table Discounter sales (£m) and year-on-year change (%), 2005-15e
      • Inflation will rise due to cost price pressures, while volume growth will ease
    • Food versus non-food
      • Food & grocery to underperform non-food as discounters diversify their offers
      • Food & grocery sector drives discounter inflation growth
        • Table Discounter food & grocery sales (£m) and year-on-year change (%), 2005-15e
      • Larger homewares and DIY ranges will push non-food growth
        • Table Discounter non-food & grocery sales (£m) and year-on-year change (%), 2015-20e
    • Sector segmentation
      • Table Discounter sector performance (£bn), 2015-20e
      • Table Discounter sector performance year-on-year change (%), 2015-20e
      • Health & beauty
      • Homewares
      • DIY & gardening
      • Toys
      • Books, news and stationery
      • Other
    • Spend per head
  • Channel Shares
    • Definition
      • Table Discounter expenditure channels of distribution definitions, 2015
    • Channel breakdown
      • Five-year summary
        • Table Discounter expenditure channels of distribution (%), 2010-15e
      • Forecast
        • Table Discounter expenditure channels of distribution (£m and % share), 2014, 2015e and 2020e
      • Channel shares
      • Channel expenditure growth
      • Change in channel share
  • Market Shares
    • Discounter market shares
      • Table Discounter market shares (%), 2010-15e
      • Winners and losers
      • Market shares excluding the German grocers
        • Table Discounter market shares, excluding Aldi and Lidl (%), 2010-15e
    • Key operating statistics
      • Summary
        • Table Discounter UK operating statistics, 2014/15e
      • Sales
        • Table Discounter UK sales (£m) and five-year change (%), 2010-15e
      • Stores
        • Table Discounter UK sales (£m) and five-year change (%), 2010-15e
      • Operating margin
      • Sales densities
      • Sales growth versus space growth
  • Trends
    • Space expansion opportunities
      • Summary
      • Store openings must become more strategic
      • Space productivity
      • Regional opportunities
      • Physical location opportunities
      • Discounters grow their OOT presence
    • The threat of, and to, the grocers
      • Mainstream supermarkets will continue to react
      • But discounter grocery market share challenge will continue
    • If you can't beat them, join them: Sainsbury's and Netto
      • Unique partnership will impact discount grocery
    • Private label advancement can improve destination appeal
      • Private label ranges allow discounters to become destinations
      • Opportunities for private label growth lie in the home sectors
      • Private label perception among UK consumers
      • Value own brand ranges appeal to the discounters' core 35-54 year old savvy family shopper
    • Discounters currently have a limited online presence
      • Major discounters online
      • Several hurdles remain to the success of discounter formats online
      • Discounters must have ecommerce presence to maximise potential
      • Discounters will have to adapt to see gains from ecommerce
    • International opportunities and local threats
      • Growing strength of discounters across Europe
      • European countries to target and avoid
      • Germany
      • France
      • Spain
      • Ireland
      • Central and Eastern Europe
  • Methodology
    • Discounter market size and forecast methodology
    • Discounter market share methodology
    • Discounter sales density methodology
    • Discounter spend per head methodology
    • Definitions
      • Discounter market definition
  • Appendix
    • About Verdict Retail
    • Disclaimer

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