Discount retailers becoming irresistible, says IGD
The low price and convenience combination of the discount retailers is proving irresistible to many consumers, with the current retail climate being dubbed 'The Age of The Discounter' by Joanne Denney-Finch, chief executive for food and grocery industry think-tank, IGD.
Speaking at IGD's Annual Global Conference, Denney-Finch made the point that retailers should not underestimate the role of discounters, as their low price formats have met with success across continental Europe, the USA and even Japan.
European favour According to IGD, since the early 1990s discount store numbers across Europe have doubled to some 30,000, with Lidl having led the growth with an increase in its store numbers from less than 1,000 in 1991 to 5,000 in 2004. In Europe, where planning regulations tend to favour the smaller discount format, discounters are currently succeeding in expanding both retail space (for example, Lidl has entered one new market per year) and growing turnover at existing stores.
Like-for-like sales growth has also been impressive; Aldi's sales have grown by more than 25% during the past five years, driven mainly by range adaptation, the increase in consumer price-awareness (due to poor economic conditions in continental Europe), and the introduction of the Euro.
Broader appeal "We have seen a dramatic change world-wide as the discounters move away from their core lines," said Denney-Finch. "In Europe they have gone from a focus on dry goods to stocking fresh meat and produce, ready meals, and healthy eating alternatives, which is really helping to broaden their consumer appeal."
IGD's conclusion is that the discounters' combination of low price and convenience is proving irresistible to price-conscious consumers, and the firm expects that this will fuel the continued growth of these retailers.
Competitive challenge "They are overcoming their traditional weaknesses that limited their appeal, and which meant shoppers had to shop elsewhere to get all their shopping needs. They now list key brands, they're increasing their marketing emphasis, and they're introducing customer service initiatives such as debit cards and longer opening hours," explained Denney-Finch.
With range adaptation and own label improvements, hard discounters are now able to cater for the full weekly shopping trip and, if they succeed in switching from 'top-up shopping' to being the main weekly shopping destination, there is a big challenge ahead for their non-discounting competition.
"If there is one lesson we can learn from the discounters, it's to keep it simple and keep focused," concluded Denney-Finch.