Discount retail has rapidly grown over the last few years. A GlobalData report highlighted that, between 2012 and 2017, there was a 75 per cent increase and the market is now worth £23.9 billion, with this expected to steal an extra £9 billion worth of sales from the total retail market over the next five years.
During the financial crisis in the UK, consumers turned to discount retailers to save money on their weekly shopping bill. Fast forward to 2017 and, although where you shop has historically been a social signifier, it’s become more widely acceptable and typical of consumers to shop for value. In fact, it’s become a badge of honour to secure a bargain and share the experience with friends.
While the Big Four and other retailers document their financial woes and sluggish expansion, the likes of Aldi, Lidl, Poundland and Home Bargains buck trends in the retail industry and continue on their upward trajectory, reporting booming profits and opening new stores on every corner, while many traditional supermarkets close outlets amid the growing popularity of internet shopping.
So, how do they do it?
The discount advantage
Discounters have changed the dynamics of the market by forcing down margins in some product categories . The business model of these retailers allows them to offer quality products at lower prices, appealing to shoppers on a budget – but they haven’t forgotten about the demand from middle-class consumers for high-end products at competitive prices, so they can tap into this demographic, too.
Discounters generally have a more limited, ‘capsule’ product range in their stores, so less cash is tied up in the stock room, HMY is working in solutions related with that challenge through Slim line products (check them here). They also avoid sourcing products directly from brands, allowing the price mark-up to be higher, and they really do practise what they preach by having genuine bargaining power with suppliers.
There’s been a clear generational shift in retail patterns, while overall customer perception has also changed. Consumers have supported ‘value’ lines and own-label products, which has no doubt contributed to the exponential growth in the market.
Finding the perfect fit
Discount retailers require modular and practical furniture to contribute to the no-nonsense shopping experience that today’s consumer values. It needs to be highly functional and efficient, and usually has no digital technology or complicated lighting – which reduces the costs associated with designing and opening new stores. While conventional retailers invest in a move towards a checkout-free future where self-service could become a consumer’s only option, discounters continue to fly the flag for traditional buying experiences, uncomplicated checkout furniture and shelving solutions.
However, that’s not to say they won’t experiment with new technology moving forward. As discounters continue their bid to dominate the retail market, there will be a need to adopt new concepts to keep up with the product display innovation we see in other retail stores.
The future of discount
DIY and gardening, health and beauty and homewares are expected to deliver strong category growth in the discount retail market as the big players continue to expand their ranges and add garden centres and cafes to their retail spaces – a move that can only be beneficial to their growth plans.
Asda, Tesco, Morrisons and Sainsbury’s have a large geographical reach in the UK and there’s still a way to go for discounters to secure their position in the market but, with Aldi and Lidl promising to continue opening a new store every week, we can assume that their footprint will grow and they will continue gaining crucial market share from their better established counterparts – could the ‘Big Six’ be on its way?
Are you a UK discounter looking to keep your stores ahead? Get in touch with us today.
