What you need to know
The discount retail sector remains one of fastest-growing sectors within UK retail, with an estimated sales growth of 7.9% in 2018 to £31.8 billion, equating to 8.9% of all retail sales.
Aldi and Lidl are driving this growth as the UK’s leading food discounters, with a combined share of 12.9% of the UK grocery market. Mintel’s research highlights that Aldi is the more successful and favoured one of the two, putting it in a strong position to deliver its future growth plans. Even so, Lidl’s position in the market is not to be overlooked as it has overtaken the Co-op in 2018 as the UK’s sixth-largest retailer.
The non-food discount sector has continued to slow down, with sales growth in 2018 at 1.6% to just over £10 billion. However, the stores still maintain their appeal, with 86% of shoppers visiting a non-food discounter in the three months to June 2019. While B&M and Home Bargains continue to grow at a faster rate than the others, Poundland continues to be the most popular and recognised brand.
Areas covered in this Report
In this Report, the discounters are split into two main segments: food and non-food.
The two national food discounters are Aldi and Lidl. There are also regional players such as Heron Foods and Jack’s, Tesco’s new discount format.
The non-food discounters include those stores that focus on a variety of goods. For some, food can be one of their main product categories, however, the majority of the food offer is dedicated to ambient groceries with little or no fresh, chilled or frozen products. The main national players included in this Report are Poundland, B&M, Home Bargains and Wilko. A new entrant to the market in 2019 is One Below.
In previous years, the non-food discount sector was broken down further into fixed-price and multi-price. Currently, all national non-food discounters now adopt a multi-price strategy, even though the £1 price point remains at the heart of the Poundland business. Some smaller regional players remain fixed-price, however, this Report will focus on national players only.
What is a discounter?
One of the challenges with the discount market is that it is a broad term rather than a clearly identifiable segment.
As a result, we have decided that the best way forward is to identify specific retailers that fall into our definition of a ‘Discounter’.
Our definition of a discounter is a store that uses price as its defining feature, but it must also follow the discount model of having extremely tight cost control and very focused buying. Finally, it must, for the bulk of its stock at least, deliver consistent product lines, so we exclude outlet stores like TK Maxx or Bargain Crazy.
This means that our market size is based on a fairly limited list, but we think that this methodology is fair since true ‘discounting’ is for larger retailers, with smaller stores unable to truly achieve the economy of scale required.
