In most countries, discounters are gaining market share, but not everywhere: the model also has weaknesses. Therefore, discounters are innovating with new store concepts – including convenience stores – and taking steps in digitalisation.
Divergent performance
Most discounters did well during the corona crisis. They gained market share in a majority of countries and will continue to do so in the coming years. But they lost ground in some key markets. This indicates that the discount model also has weaknesses and that discounters need to evolve to stay relevant, says a recent study by IGD.
Worldwide, discount chains currently have a turnover of 492 billion euros. By 2022, sales will reach 554.9 billion, thanks to an expected annual growth rate of 6.2%. But this retail channel is not growing equally fast everywhere. The analysis compares the performance of discount chains in the US, Russia, Australia and some European countries. It shows that the discounters lost market share last year in some key markets, such as the UK, the Netherlands and Germany.
Under pressure in Germany
Discounters have the largest market share in Norway: more than 60%. It is worth noting that these are exclusively Norwegian chains: international names such as Aldi and Lidl are not even present there. In Poland, Spain and Germany, the market share is around 40%.
Germany – the home of the discounters – is the only country where the low-price chains will lose market share in the coming years, according to IGD. The decline is due to the weaker results of Aldi Nord and the strong performance of the supermarkets, which seem to have found the right mix between choice, quality and price. In the other markets, discounters are growing more strongly than traditional supermarkets.
Opportunities for brands
For brand manufacturers, discounters should be a strategic priority, says IGD: these retailers are growing faster than the market in most countries and with fewer suppliers and less competitive products on the shelves, they offer great opportunities for growth. They make more room for branded products to compete directly with other large supermarket chains.
The physical store remains the big priority for discounters, in which they invest heavily. Several retailers are improving the shopping experience and introducing technological solutions that contribute to more efficient operations. Also, discounters adapt their concepts and assortments to local market requirements. The era of one channel, one concept, is over. Discounters are exploring new locations and focus more on convenience. Digitalisation is mainly expressed in the launch of apps, digital loyalty programmes, scan & go concepts and shop automation.
European evolutions
A few remarkable evolutions? In Germany, discounters focus more on sustainability, with a focus on local products and green energy. Lidl is the big winner there, with larger shops that offer a wider assortment than Aldi. The Lidl Plus app with the mobile payment solution Lidl Pay gets a European roll-out. Aldi, for its part, is testing a click & collect concept in the UK and is working with Deliveroo for the delivery of groceries.
In Spain, the discounters are furthest along with online. Both Dia and Mercadona have their own e-commerce activity, Lidl works together with Lola Market, Aldi does so with flash delivery Glovo. In Poland, too, price fighters are testing the potential of online: local player Biedronka has a click & collect service and has orders delivered by Glovo.
Further afield…
In Russia, the strong growth of Siberian price breaker Svetofor is remarkable: the success of this discounter forced supermarket groups like X5 and Magnit to launch their own discount chains. Svetofor now wants to conquer Europe under the name Mere. Recently, the chain opened its first British store, Belgium will follow soon.
In the US, discount is still very small, with a market share of 6.6%. Local players like Dollar Tree and Dollar General are leading the way, adding fresh food and shifting the focus to rural areas. Both Aldi and Lidl have ambitious expansion plans. Finally, in Australia, Aldi has almost all the space in the world to itself. The German discounter recently launched a striking new concept: Aldi Corner Store, a colourful convenience store with a warm atmosphere and a focus on fresh and food-to-go. This format gives the retailer easier access to urban locations. It could well be the harbinger of further evolutions towards convenience-discount.
