From the lure of the middle aisle to the thrill of a bargain, Britain’s savvy shoppers are set to splash out £34.4 billion at food and non-food discounters in 2022—an annual increase of 6.6%—as the sector looks set to spring back to growth, benefiting from continued economic uncertainty.
Next year’s forecast return to growth will be much welcomed by the sector, as food and non-food discounter sales in 2021 are expected to drop to £32.3 billion, following a bumper 2020 when sales increased by 9.2% to hit £32.7 billion. Meanwhile, sales of food discounters alone are expected to rise by 6.1% in 2022 to reach £22.5 billion. Dominated by Aldi and Lidl, combined, these two discount giants account for around 14% of the UK grocery market.
Overall, the food and non-food discount sector accounted for around 9.5% of all retail sales in the UK in 2020, although this is estimated to have dropped slightly to 9.1% in 2021.
Meanwhile, Mintel research reveals that COVID-19 has promoted even savvier shopping habits among Britain’s more affluent consumers, with over a third (34%) of higher earning* shoppers shopping at discounters** more since before the start of the COVID-19 outbreak.
With an eye for quality, almost seven in ten (67%) of these ‘better-off’ discount shoppers say they find own-brand luxury food ranges at food discounters to be as good as those at other supermarkets.
But it’s not just sharp-elbowed, ‘better off’ Brits flocking to discounters. Budget stores are proving particularly popular among men aged 25-44 with over four in ten (42%) saying they have increased their discount shopping since the start of the COVID-19 outbreak. This compares to an increase of just over one in five (22%) of all discount shoppers. Meanwhile, it’s the freshly baked goods which are attracting younger Brits to food discounters, with 42% of 16-24s buying these compared to 32% of over-65s.
Piers Butel, Retail Analyst at Mintel, said:
“Despite concerns around their lack of ecommerce offering and potentially crowded stores, the discounters saw sales surge in pandemic-struck 2020. This growth was driven by a series of factors including leading discounters increasing the number of stores opened and the ongoing financial uncertainty driven by the pandemic. This uncertainty makes the value-proposition of the discounters even more tempting for consumers and, in particular, young families with extra mouths to feed, 99% of whom shopped at discounters, according to our research.
“As attitudes have shifted over the last few decades, we have seen men increasingly take part in the grocery shop. Despite this narrowing gap, there are still differences in how men approach the activity, with male shoppers generally preferring to spend less time in-store when shopping. The convenience and speed of the retail experience at discounters, with their smaller ranges and fast checkouts, are likely to particularly appeal to this demographic group.
“Looking ahead, the sector is set to leave the turbulent last 18 months behind with a spring in its step as continuing economic uncertainty and high inflation makes its straightforward, value-led proposition ever more tempting for consumers.”
eCommerce is proving a hard nut to crack
While the last 18 months have seen a remarkable surge in online retail, just 30% of shoppers who typically shop at discounters with ecommerce operations use these online shopping options. This comes as a third (33%) of discounter shoppers say they find click-and-collect services appealing and 32% say they are happy to pay a delivery fee for their discounter purchases.
“Although online retailing is here to stay and all retailers should be looking at how they can enter this space, careful consideration should be given before launching into the channel. Opening up online operations has the potential to pull footfall away from stores, which can be an issue for discounters reliant on high volumes of footfall passing through the doors. Discount retailers will also have to balance their value credentials against the cost of deliveries which consumers are increasingly expecting to be free. Indeed, discounters may struggle to build full online retail operations without significant changes and possible disruption to the simple, low-cost business model which has been the source of their recent success.
“As life returns to something more normal, we may see that most discounter shoppers value the store-based experience over full online retail options. Click-and-collect schemes or partnerships with delivery companies can provide lower-cost alternatives for discounters to stake a foothold on the online channel. This way retailers can engage with those customers who want to shop online, whilst continuing to focus on their physical stores and the majority of customers who still want to visit them.”
Notes to Editors
Mintel commissioned consumer research among 2,000 internet users aged 16+ in July 2021.
*Household income of £50,000 and over who typically shop at discounters
**Both food and non-discounters (eg Aldi, Lidl and Wilko)