Drop the loyalty card, report advises retailers

- Last updated on GMT

Related tags: European food, Retailing

Mergers and dynamic growth are set to mark the European food
retailing landscape in the near future according to a new report
from market research company Mintel.

Mergers and dynamic growth are set to mark the European food retailing landscape in the near future according to a new report from market research company Mintel.

The report claims that food is one of the most innovative retail sectors with sales forecast to grow by 17 per cent between 2001 and 2006. It adds that the rationalisation of the European food retail sector started by Wal-Mart and Carrefour in the late 1990s still has 'far to go.'​ with the expansion of market leaders into non-foods areas.

"Sales through supermarkets and superstores which have capitalised on their non-food offer have continued to outperform those of the food trade as a whole and the effect on specialist retailers in all these markets will be dramatic,"​ said Richard Perks, Senior European Retail Analyst.

As total consumer spending on food reached €903bn in Europe in 2001, European food retailers registered a market growth of 22.7 per cent.

According to the report growth has been fuelled by a number of factors with the development of 'one-stop shopping' playing a key role. One-stop shopping still represents one of the greatest opportunities for growth, the Mintel​ report claims. But consumers have become more demanding of retailers.

"Food retailers, therefore, must have a clear idea of their target market, its needs and aspirations, because any shortcomings in the offer will be punished as customers switch to competitors,"​ continued Richard Perks.

As space is becoming more important a trend is developing for polarisation between large out-of-town superstores and small town-centre convenience stores. This trend is affecting those retailers with shops that fit neither description.

"It is the high street retailer in the middle that is being squeezed as the performance of Iceland [UK food group] and Somerfield[UK food group] makes clear. They share the problem of a portfolio of stores that sit uneasily between superstores and convenience stores,"​ the report stated.

On the topic of loyalty cards Richard Perks commented: "they have proved a useful promotional tool, but loyalty has to be earned and cannot be bought by a few points on a card."​ The report stressed that retailers earn loyalty through the excellence orappropriateness of their consumer proposition. ' Providing consumers withone-stop shopping and clear product offer is therefore more likely to contributeto store loyalty than loyalty card schemes'​ the report concluded.

Related topics: Market Trends

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