Discount Retailing Background
The term ‘discounters’ is usually applied to those retailers who offer a ‘no-frills’ approach, with the provision of low prices given priority above all other elements of the retail mix such as location, customer service, range and merchandising.
Traditionally, discounters have been divided into one of three categories, hard, soft and other such as Discount Superstores, Wholesale Clubs and Dollar Stores.
The hard discounter is the ‘purest’ type of discounter, and refers to the European operators Aldi, Lidl and Netto. Key characteristics of this type have traditionally been as follows:
- Limited range (typically fewer than 1,000 lines)
- Store size 6,000-15,000 sq ft
- Core range of dry grocery goods, with limited fresh, frozen and chilled items
- Very basic store interior with low build cost and functional feel
- Dominance of private or “exclusive” labels, with few national brands
- Non-food ranges promoted through “weekly specials”
- Limited staff levels, limited use of technology or customer service
Soft discounters typically have a wider range of goods, including a greater offer in fresh, frozen, and branded goods. Kwik Save has been described as a soft discounter in the UK.
UK Discounters
The UK discount food sector is dominated by four leading retailers, namely Aldi, Lidl, Netto and Kwik Save. The chart below shows how store numbers have changed over the last 15 years, with a marked decline in the number of Kwik Save stores since 1996, a process which has been accelerated since Kwik Save was acquired by Somerfield in 1998. Since that time the retailer has embarked upon a process of converting stores to the Somerfield fascia.
Discounter Historical UK Store Numbers
Source: IGD Research
Despite entering the UK up to 15 years ago, the hard discounters have failed to make a significant breakthrough in the UK, with current market share of around 5%. However, they are now showing signs of resurgence and adaptation and have expansive strategies in place. A number of improvements have been made to their operations in the UK, which should widen the appeal of their offers, including significant investment in product quality, range and store environment.
In addition to the food discounters there is a growing number of non-food, variety and specialist retailers operating in the UK discount sector including Wilkinson, Savers, Poundland, 99p Stores and Farmfoods. All of these retailers are currently enjoying a period of strong growth as consumers are placing an increased level of importance on ‘value’.
Shopping at UK Discounters
IGD research reveals that 11% of shoppers are loyal to discounters doing most of their shopping in these stores. The reason that only a small percentage of shoppers claim to do most of their shopping at discounters may be attributed to the limited product offer. The more common approach to shopping in discounters is for shoppers to get a proportion of products there. Over half of respondents (54%) take this approach whilst the remaining 35% claim never to shop in discounter stores.
Attitude Towards Discounter Stores
Source: IGD Consumer Research 2004
Shoppers who are most likely to do most of their shopping in discounters are those in social class DE and younger shoppers. High street locations may also be a determining factor for shoppers without cars in choosing discounters for their main shopping trip.
Shoppers Who Will Do Most of Their Shopping in Discounters
Source: IGD Consumer Research 2004
Reasons for not shopping at Discounters
IGD research indicates that the main reason for not shopping in discounters relates not to any negative perception shoppers may have of these stores but the fact that there is not a store convenient to them. After the convenience factor the main barrier to shopping at discounters is the product range:
- 23% of shoppers will not shop at discounters because they don’t recognise the brands
- 18% find the limited choice a barrier to shopping at discounters.
Will Not Shop in Discounters
Source: IGD Consumer Research 2004
