Middle-of-the-road retail dries up

By Anita Awbi

- Last updated on GMT

Related tags Supermarket

Budget supermarkets and premium retailers are rejuvenating
Britain's mature grocery sector by responding to new consumer
trends - while the stale supermarket centre-ground has reached full
saturation point.

Niche grocers are better placed to respond to the changing purchasing habits of discerning consumers who look for value in food staples and quality in luxury items. This is leading to polarisation of the food retail market and traditional all-under-one-roof vendors may be squeezed out.

According to the Institute of Grocery Distribution (IGD), operators such as Marks and Spencer, Waitrose and Booths are performing strongly at the premium end of the market - and will continue to do so as they tap into consumers' tendencies to seek out certain high quality, higher value lines.

"We see customers looking for quality of ingredients, convenience and provenance,"​ said a Marks and Spencers spokesperson.

"Take for example our special Oakham farm chickens - they are exclusive to Marks and Spencers and are proving really popular,"​ she added.

Meanwhile hard discounters, such as Netto, Lidl and Aldi, are showing signs of resurgence and adaptation after failing to make a significant breakthrough when they entered the British retail market in the 1990s.

Netto and Aldi are both offering repackaged private label products and a greater selection of fresh produce in a bid to win business from the conventional grocery market.

Together with Lidl they currently take just over 5 per cent of the market share, according to TNS figures.

But the IGD forecasts a 56 per cent increase in store numbers by 2010 as the discounters focus on significant expansion across the UK.

This translates to an increase in turnover from £3.5 billion in 2005 to £6.2 billion in 2010.

While premium and budget retailers appear to be at either end of the grocery scale, consumers are increasingly using both depending on whether they require staples or luxury items, indicating a new flexibility among shoppers.

Tim Greenhalgh, managing creative director for UK design firm Fitch, works with companies to develop packaging that responds to consumer trends. He has noticed a polarisation in the marketplace caused by a general shift in consumer demand and the emergence of a new 'no brow' culture.

He believes that people are starting to look for bargains and added value - driving the same consumer into different purchasing habits.

"The 'no brow' consumer is the person who buys an easyjet flight and stays in a top hotel,"​ he said.

"The key thing we have learned at Fitch is that there has been a polarisation of attitudes to value."

While quality retailers use premiumisation as an inherent strategy to drive value growth of products, and ultimately profits, discounters aim for volume growth, thus appealing to the bargain-hunter tendencies of shoppers.

To compete in this model, traditional supermarkets may need to redefine their niche sector.

But currently three quarters of shoppers still use their normal retailer to buy luxury foods, while the remaining use specialist shops and other supermarkets for these products.

And although Aldi, Lidl and Netto have indicated ambitious expansion plans, estimated at a cumulative growth from 837 stores to 1306 by 2010, regulatory factors including planning restrictions and competition issues may hinder growth.

Related topics Market Trends

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