Food and Non-food Discounters - UK - September 2015

food and foodservice

“In both food and non-food retailing discounters are making a big impact and they still have some way to go. We expect a period of consolidation in non-food discounting which will begin with Poundland absorbing 99p Stores. But even with that bonus Poundland and its multi-price peers led by B&M and Home Bargains have plenty of scope for growth. All the major food retailers are concerned about what Aldi and Lidl are doing, and they have plenty of scope for expansion as well. But not only are they taking share from the superstores, they are ideally placed to capitalise on the trend towards convenience retailing as well.”
– Richard Perks, Director of Retail Research

This report answers the following key questions:

Is the non-food discount sector already overshopped?
Who are they really in competition with?
How are the underlying trends in the marketplace affecting the non-food discounters?
Can the food discounters continue their dramatic growth?
Is there a place for online in discount retailing?

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Consumer Attitudes and Behaviour
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Risks and Opportunities
What’s Next
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Overview
- What you need to know
- Areas covered in this report
- What is a discounter?
Executive Summary
- The market
- Discounters
- Market size and forecast
  - Figure 1: All discounters’ sector size (£m excl VAT), 2010-20
- Discounters and the economy
- Companies, brands and innovation
  - Figure 2: Discounters’ market shares, 2014
- Product mix
  - Figure 3: Non-food discounters’ estimated product mix, 2014
- Innovation
- Online
- The consumer
- Where people shop
  - Figure 4: Discounters: Frequency of visits, July, 2015
  - Figure 5: Repertoire of shopping frequency, July 2015
- Products bought
  - Figure 6: Products bought from food and non-food discounters in the last three months, July 2015
- Appeal of discounters
  - Figure 7: Consumer attitudes towards discounters, July 2015
- What would make people shop at discounters more?
  - Figure 8: What would make people shop at discounters more, July 2015
- What we think
- Challenging
- Not just about bargains
- Fitting in with the convenience trend
Issues and Insights
- Is the non-food discount sector already overshopped?
- The facts
- The implications
- Who are they really in competition with?
- The facts
- The implications
- How are the underlying trends in the marketplace affecting the non-food discounters?
- The facts
- The implications
- Can the food discounters continue their dramatic growth?
- The facts
- The implications
- Is there a place for online in discount retailing?
- The facts
- The implications
The Market – What You Need to Know
- Rapid growth
- Not just a product of the recession
- Keys to success
- Looking forward
Market Size and Forecast
- - Figure 9: Discounters’ market size, 2009/10-2014/15
- - Figure 10: Food and non-food discounters’ share of retail sales, 2009-14
- Much more than a product of the recession
  - Figure 11: UK: GDP growth at constant prices, 2005-15
- How do they do it?
- Aldi/Lidl
- Non-food discounters – The multi-price model
- Non-food discounters – The fixed-price model
- The forecast
  - Figure 12: All discounters’ sector size (£m excl VAT), 2010-20
  - Figure 13: Sales and forecast: All discounters, 2010-20
- Segmental analysis – Food discounters
  - Figure 14: Food discounters’ sector size (£m excl VAT), 2010-20
  - Figure 15: Sales and forecast: Food discounters, 2010-20
- Segmental analysis – Non-food discounters
  - Figure 16: Non-food discounters’ sector size (£m excl VAT), 2010-20
  - Figure 17: Sales and forecast: Non-food discounters, 2010-20
The Consumer – What You Need to Know
- The appeal of a bargain
- Very wide use
- So much more than for those just short of cash
- Broad product appeal
- Where could they do better?
Who Shops Where?
- - Figure 18: Discounters: Frequency of visits, July 2015
- - Figure 19: Repertoire of shopping frequency, July 2015
- - Figure 20: Profile of customers who have bought from leading discounters in the last three months, July 2015
- Discounters by region
  - Figure 21: Discounters: Regional strengths and weaknesses, July 2015
Products Bought
- - Figure 22: Products bought from any discounter in the last three months, July 2015
- - Figure 23: Products bought from food and non-food discounters in the last three months, July 2015
- - Figure 24: Profile of food and non-food discounter shoppers, by products bought, July 2015
- - Figure 25: Discounters used, by products bought, July 2015
Why Do People Shop at Discounters?
- - Figure 26: Consumer attitudes towards discounters, July 2015
- - Figure 27: Consumer attitudes towards discounters, by discounter shopped at, July 2015
What Would Make People Shop at Discounters More?
- - Figure 28: What would make people shop at discounters more, July 2015
- - Figure 29: What would make people shop more at discounters, by where they already shop, July 2015
- Poundland vs 99p Stores
Why Do People Not Shop at Discounters?
- - Figure 30: Why consumers hadn’t shopped at a discounter in the last three months, July 2015
Key Players – What You Need to Know
- Aldi and Lidl driving all before them
- Poundland leads the field in fixed-price discounters
- B&M and Home Bargains the leaders in multi-price discounting
- Online – Most are trying to do it
Key Players
- - Figure 31: Leading discounters’ sales, 2009/10-2014/15
  - Figure 32: Leading discounters’ operating profits, 2009/10-2014/15
- - Figure 33: Leading discounters’ operating margins, 2009/10-2014/15
  - Figure 34: Leading discounters’ outlet numbers, 2009/10-2014/15
- - Figure 35: Leading discounters’ sales per outlet, 2009/10-2014/15
  - Figure 36: Leading discounters’ sales per sq m, 2009/10-2014/15
Innovation and Launch Activity
- Instant reward scheme
- Retailers responding to changing consumer shopping habits…
- …new discount grocery chain targeting value-conscious shoppers
- …new chain of low-priced clothing stores
- …discount second-hand jewellery chain
- …department store group launches chain of discount stores
- …‘like-new’ products discount outlet
- Former Asda chief launches discount fashion chain
- Fixed-price discounter focusing on suburban locations
- Store on stilts
  - Figure 37: Lidl, Terenure, Ireland
- Pop-up discount store
- Specialty food discount store
- Online pound shops
Brand Communication and Promotion
- - Figure 38: Recorded above-the-line, online display and direct mail total advertising expenditure by the UK’s leading discounters, 2010-14
- Top advertisers
- - Figure 39: Recorded above-the-line, online display and direct mail total advertising expenditure by leading UK discounters, 2010-14
- Share of advertising spend
  - Figure 40: Recorded above-the-line, online display and direct mail total advertising expenditure by the UK’s leading discounters, by media type, 2011-14
- A note on adspend
Online
- - Figure 41: Discounters with transactional websites, 2015
Space Allocation Summary
- - Figure 42: Food discounters: Summary space allocation estimates, August 2015
  - Figure 43: Fixed-price non-food discounters: Summary space allocation estimates, August 2015
- - Figure 44: Multi-price non-food discounters: Summary space allocation estimates, August 2015
  - Figure 45: Discounters: Detailed space allocation estimates, August 2015
Retail Product Mix
- Food discounters
  - Figure 46: Food discounters’ estimated product mix, 2014
- Non-food discounters
  - Figure 47: Multi-price non-food discounters‘ estimated product mix, 2014
  - Figure 48: Fixed-price non-food discounters’ estimated product mix, 2014
- Sales densities
  - Figure 49: Leading discounters, estimated sales densities, 2014
Market Shares
- - Figure 50: Discounters’ market shares, 2012-14
99p Stores Ltd
- What we think
- Background
- Company performance
  - Figure 51: 99p Stores Ltd: Group financial performance, 2009/10-2013/14
  - Figure 52: 99p Stores Ltd: Outlet data, 2009/10-2013/14
- Retail offering
Aldi Stores Ltd (UK & Ireland)
- What we think
- Why is Aldi doing so well?
- How does it do it?
- Where next?
- Background
- Company performance
  - Figure 53: Aldi Stores Ltd (UK & Ireland): Group financial performance, 2009/10-2013/14
  - Figure 54: Aldi Stores Ltd (UK & Ireland): Outlet data, 2009/10-2013/14
- Retail offering
B&M Retail
- What we think
- Background
- Company performance
  - Figure 55: B&M European Value Retail: Group financial performance, 2011/12-2014/15
- - Figure 56: B&M European Value Retail: Outlet data, 2011/12-2014/15
- Retail offering
  - Figure 57: B&M sales mix, 2013
  - Figure 58: B&M sales mix, by product price, 2013
Home Bargains (TJ Morris Ltd)
- What we think
- Background
- Company performance
  - Figure 59: TJ Morris Ltd: Group financial performance, 2009/10-2014/15
  - Figure 60: TJ Morris Ltd: Outlet data, 2009/10-2014/15
- Retail offering
Lidl (UK)
- What we think
- Background
- Company performance
  - Figure 61: Lidl (UK): Estimated group financial performance, 2010/11-2014/15
  - Figure 62: Lidl (UK): Outlet data, 2010/11-2014/15
- Retail offering
Poundland Ltd
- What we think
- Background
- Company performance
  - Figure 63: Poundland Ltd: Group financial performance, 2010/11-2014/15
  - Figure 64: Poundland Ltd: Outlet data, 2010/11-2014/15
- Retail offering
  - Figure 65: Poundland product mix, 2014
Poundstretcher
- What we think
- Background
- Company performance
  - Figure 66: Poundstretcher: Group financial performance, 2009/10-2013/14
  - Figure 67: Poundstretcher: Outlet data, 2009/10-2013/14
- Retail offering
Poundworld Retail Ltd
- What we think
- Poor performance
- TPG buying in
- Where next?
- Background
- Company performance
  - Figure 68: Poundworld Retail Ltd: Group financial performance, 2009/10-2014/15
  - Figure 69: Poundworld Retail Ltd: Outlet data, 2009/10-2014/15
- Retail offering
The Original Factory Shop Ltd
- What we think
- Background
- Company performance
  - Figure 70: The Original Factory Shop Ltd: Group financial performance, 2009/10-2014/15
  - Figure 71: The Original Factory Shop Ltd: Outlet data, 2009/10-2014/15
- Retail offering
Wilkinson Hardware Stores Ltd
- What we think
- Background
- Company performance
  - Figure 72: Wilkinson Hardware Stores Ltd: Group financial performance, 2010/11-2014/15
  - Figure 73: Wilkinson Hardware Stores Ltd: Outlet data, 2010/11-2014/15
- Retail offering
Appendix – Data Sources and Abbreviations
- Data sources
- Mintel’s discounter market size
- Forecast methodology
- Financial definitions
- VAT
- Abbreviations