The UK value, discount, variety stores and general merchandise retail channel is set to grow by 5 per cent per year taking its value to £59.4bn in 2027 as more shoppers turn to value-focused retailers to make their budgets stretch further during the cost-of-living crisis.
According to new research from GlobalData, the collapse of Wilko should be seen as an outlier in a sector where consumers are keen to save where they can and shopping at discounters has become an increasingly popular course of action.
The research found that 48 per cent of shoppers say they are trading down to cope with rising prices in essential sectors like food, groceries and toiletries, either by switching retailers or by turning to cheaper products at the same retailer. This proportion rises to 54 per cent for women and 62 per cent for 25-34-year-olds. And with average earnings failing to keep pace with inflation, six out of 10 shoppers expect their personal finances to worsen over the next six months.
Nick Gladding, Lead Retail Analyst at GlobalData, states that discount retailers are continuing to benefit from a clear thirst for value among consumers.
Food and grocery will be the dominant force within the discount channel, with almost 60 per cent of discounters’ shoppers using them to buy these products and 37 per cent of shoppers stating that the high cost of food has prompted them to make the switch from mainstream supermarkets. Discounters are also appealing to shoppers for the quality of their food as well as low prices. 55 per cent of consumers said they were very or extremely satisfied and 39 per cent somewhat satisfied according to GlobalData’s discounters survey.
“Aldi and Lidl are set to be the prime beneficiaries as they expand to meet the surge in demand. Over the next five years we expect the pair to grow their combined sales by almost £10bn as they deliver on their fast-paced store opening programmes and make their stores more compelling. With other operators also targeting grocery, notably Home Bargains and B&M, discounters’ sales of food & grocery are set to rise from £26.3bn to £36.8bn. This will lift discounters’ share of the total food & grocery market from 15.3 per cent to 18.0 per cent over the next five years,”
“When the economy does recover, retailers will need to adapt their ranges to retain customer loyalty. Expect to see them increase their focus on quality and improve their ethical credentials. We are also likely to see them broaden their offer of higher priced items,” Gladding added.