At the beginning of 2016, the industry buzz was about shifting industry trends toward online grocery shopping and increasing competition from discounters. The whole industry was responding to a massive and elemental change in how people shopped for their food. The prediction was that online shopping would increase from 5% to 9% by 2021. Research into the data indicates that these are still huge factors in the grocery industry’s performance.
As for the competitive price wars at discount stores, Aldi and Lidl had been growing quickly in 2015 and the anticipation at the beginning of 2016 was that the grocery market would settle down and the Big 4 would continue to perform very well.
That was then. What about now?
In February 2017, Euromonitor International reported that the discounters were still the “standout channel in grocery retailers” throughout 2016 with a growth of 11% over the year. This growth was the result of increasing price-sensitivity, expansion of leading discount store networks, and a greater focus on luxury discounting.
Of the Big 4, Tesco remained on top with a value share of 21%. However – and this is a pertinent point – it did drop slightly in overall grocery retailers for the two reasons that the grocery industry is shifting: more people shopping online and increasing competition from the discounters. Sainsbury’s and Asda also lost market share in 2016. Morrisons increased its sales by 1.9%. Discounter Aldi moved into fifth place in the grocery store ranking in 2016.
IGD reported that discount retailers’ sales, with Aldi and Lidl at the helm, continue to grow. In 2016, their sales increased almost 41%; up from an increase of 0.9% in 2015. The discount channel’s share of total UK grocery sales alone was up to 10%, an increase of almost 3 percentage points.
According to IDG, online is the only segment growing more rapidly than the discounters segment. IDG’s prediction is that online shopping will increase 68.3% over the next five-year period.
Retail Economics reported in February 2017 that online grocery sales had risen to 10.4% over the past year. This surpasses the prediction at the beginning of 2016 for online grocery sales for 2021. Kantar Worldpanel reported that worldwide, online grocery sales grew by 15% and now hold 4.4% of the market. Lest you think 4.4% is not much, globally it translates to $48 billion (USD).
Supermarkets and grocery stores seem to remain confident in strategy despite the changes, not just the changes brought about by online shopping and discounters but also the other changes in grocery retail. Other changes include an increasing attraction to convenience stores for top-up grocery shopping coupled with a major shop at a discounter and the success of the government-driven focus on a healthy eating programme (more fruit & veg, less sugar).
In a fast-paced world, supermarkets & grocery stores need speed, which means they need a strong supply chain. Discounter Lidl has an automated picking operation and a case packing system that gets products to the stores and on the shelves quickly. Grocery retailers have been reluctant to turn to technology such as this because of bad experiences in the past. The development of new technology is changing this.
Category management and shopper engagement is one thing. Contending with the big picture is another. I’m Phillip Adcock and I know the big picture. Contact me on 07960 109 876 or email firstname.lastname@example.org