07 Mar 2008


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Discounters poised to grow in UK, says Verdict

Discounter retailers

Aldi

Lidl

Netto

Germany

Verdict Research

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Discounters to take 50% share in Germany 07 Mar 2008

Source : Verdict Research
Discount retailers Aldi and Lidl are poised to grow in the UK, according to a senior analyst at Verdict Research.

Commenting on a recent report on the German retail market, where the discounters already command a 42% share, Daniel Lucht told Talking Retail: “They will be growing in the UK because the market situation is tough and because of high food price inflation, the credit crunch and Northern Rock situation.”

A tough economic climate has already benefited the discounters in Germany, according to Verdict.

“There has been high unemployment levels and low consumer confidence in Germany in recent years so that a lot of people started shopping at discounters,” said Lucht.

Lucht added that, up until now, the UK discounters had been held back by space but they may look to pick up stores from a break up of the Somerfield estate.

“They need to find locations,” he said, “and for sure they are going to look at it [Somerfield].”

Lucht said the discounters' lower levels of penetration in the UK and Ireland – 6% and 4.5% respectively – was largely a function of not being established there for as long as in continental Europe.

Discounter penetration in Belgium, for example, is 35%, while in Austria and Denmark discounters have 30% market share and 20% in the Netherlands.

Lucht said discounters have been successful in markets like Germany because they have been astute.

In 2004, for example, Aldi became the largest retailer of organic carrots in Germany.

The leading discounter also stole a march by rounding prices down rather than up when the country converted to the Euro.

A largely own brand offering will also benefit the discounters in the UK, said Lucht.

“Aldi only has own brands, which attract the best margins, but it also makes it very difficult for the consumer to compare prices,” he said.

Lidl, however, has started to introduce leading fmcg brands to its range, Lucht added.

Both retailers are also driving their image upmarket, according to Verdict.

They have improved their packaging and, in a recent Verdict report, Aldi and Lidl were rated second and third for customer satisfaction, behind Waitrose.

“One of the major reasons why they have done so well in Germany is that what you get there is usually cheap but quite high quality,” said Lucht.

“Aldi is also very strict,” he added. “They monitor results from customer watchdogs and magazines and if something does not work out they delist it.”

By the same token, winning a listing in Aldi offers a business tremendous scope for roll out across its stores in mainland Europe and the USA.

By Fiona Briggs

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