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Discount Retailing Market Report 2011
Key Note Publications Ltd, July 2011
This Key Note Market Report examines the UK discount retailing market, which, for the purposes of this report, has been divided into the following two sectors — discount grocery retailers and discount non-grocery retailers. The grocery sector is comprised of retailers, such as Aldi, Lidl and Iceland, while non-grocery retailers are dominated by outlets such as Primark and Matalan, as well non-clothing specialists such as Poundland. Although these types of retailers differ in the range of products that they sell, maintaining low costs is the most essential priority for all such companies operating within the discount market.
The UK discount retailing market experienced continual growth between 2006 and 2010, reaching £28.22bn in 2010. Grocery retailers contributed £8.15bn in sales in 2010, while non-grocery retailers accounted for £20.07bn. Despite the latter remaining the largest sector of the market throughout the review period, the grocery sector observed the greatest growth between 2006 and 2010, which has led to the sector significantly increasing its share of the total market.
The discount retailing market has expanded significantly since the recession in 2008, which saw many consumers trade down in terms of product choice in order to curb their expenditure. This was especially apparent in the grocery sector, although non-grocery retailers also saw sales increase over the same period. Growth was maintained in both sectors despite the UK’s exit from recession in late-2009. Consumer caution towards spending is believed to have helped drive sales in the aftermath of the recession, with many households in the UK still struggling financially due to high levels of unemployment.
In 2010, the industry witnessed another surge in sales. A small increase in new consumers is believed to have been behind this recent growth, as well as an increase in expenditure on discount products by regular consumers. This loyalty between the retailer and consumer will ultimately determine whether the industry will maintain its status in the future; and when the economy fully recovers and consumers once again become less cautious in their spending habits, discounters could see a drop in sales.
Key Note has forecast further growth for the market in the future, which will reach £42.24bn in 2015. Despite the UK’s exit from recession in 2009, the economic outlook has remained somewhat bleak due to the Government’s spending cuts and increases in taxes, while unemployment is expected to rise again, before gradually declining. However, the economic climate will remain resilient, which will continue to impact consumers’ shopping habits and reduce spending. Competition from non-discount retailers will also remain a big threat to the industry, notably from the dominant supermarkets in the UK.
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