What you need to know
The discounters have been one of the fastest-growing sectors through the economic downturn. But we do not think that is because they rely on a recession to be attractive. In fact the first phase of their development was through the boom times of the early 2000s. Their appeal is much more broadly based because they play to people’s desire for a bargain while at the same time focusing on offering great value for money. Both of those factors will still be important in any prolonged upturn, even though they will probably suffer as people look to trade up. They are now a permanent feature of the retail scene and they are one of the reasons why the high street is prospering at present.
They are in the right place at the right time. They will benefit from the current shift away from superstores to convenience retailing and they still have considerable potential for physical expansion. We will qualify that assertion a little through the report, but the underlying truth is that both food and non-food discounters are a relatively new phenomenon in the UK and they are a long way from being mature.
Areas covered in this report
We split the sector between food discounters and non-food discounters.
The food discounters are Aldi and Lidl. We also include Netto – for historical accuracy at the beginning of the sales record and because a Netto has recently been relaunched in a joint venture between Sainsbury’s and Dansk Supermarked.
The non-food discounter needs to be split further:
Fixed-price retailers – Poundland, Poundworld and 99p Stores.
Multi-priced retailers of which the largest are Home Bargains, B&M and Wilko.
What is a discounter?
The term “discounter” is supposed to denote a retailer that sells at lower prices than another retailer, but there is hardly a retailer around that doesn’t at least go through the motions of claiming to be cheaper than its competitors.
One possible definition is that a discounter is a retailer whose USP (Unique Selling Point) is price.
In this report we are looking at two different sorts of retailer that fall under the generally accepted description “discounter”.
Food retailing: Aldi and Lidl are most definitely discounters. Their strategy is to keep their cost base as lean as possible, concentrate buying on a very limited number of lines and so charge very low prices. But the real point about Aldi and Lidl is that they offer exceptional value for money.
Non-food retailing: Here the category is more difficult and we restrict ourselves to retailers that offer a broad range, usually including at least some food, and which focus on low prices.
So it is worth adding – what is not a discounter?
We do not include Primark. Primark offers low-price, fashionable clothing and it is as much about disposable fashion as being ultra-low priced. Perhaps we should include TK Maxx, but if we were to do that we would have to include outlet malls as well – what in the US is called the off-price sector.
In food, we do not include Iceland, though it is certainly price-led. It is quite unlike Aldi or Lidl in terms of operation and has not developed a following across all demographics in the way that Aldi and Lidl have done.
So our definitions are dictated by the retailers and our market sizes are the combined sales of these retailers. So our data for these market sizes is taken from Mintel’s own Retail Interactive database.
