Supermarkets - UK - November 2016
“Supermarkets remain the dominant sector within the wider grocery market but continue to lose market share. This is as much to do with increased choice in the market and demographic shifts as it is the fault of supermarket operators. However, there is a need to redefine what a supermarket can offer grocery shoppers and give them further reasons to visit when faced with greater, and often more convenient, options in the market.”
– Nick Carroll, Senior Retail Analyst
This report examines the following areas:
- Will Brexit cause a greater focus on sourcing?
- Own-brand: more important than ever?
- Non-foods: an increasingly competitive battleground
There is a need for supermarkets to redefine their place in the market. All the leading players have been attempting to do this and the common consensus, when you look broadly at their strategies, seems to be to give consumers more reasons to visit, through partnerships with other retailers, high-quality in-store dining and other service-based options. This seems to be a solid strategy but you have to ask will it be enough to stem the tide? In truth it is likely to come down to the quality of in-store mix; it is notable that Sainsbury’s felt it necessary to purchase one of the largest non-store operators in the industry rather than continue to build its own general merchandise (GM) offering.
Based on the current state of play, we expect the supermarket sector to return to growth in 2017 but much of this will be inflation-driven, and growth will continue to be under that of the wider market. This will mean further sector share losses, albeit at a lesser and more stable rate than has been seen in the past five years. A downturn in the economy may see footfall at supermarkets increase once more, as consumers look to trade down and rein in spending, but in comparison to the beginning of the last recession supermarkets now have a far more mature discount sector to contend with.
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