No-frills retailers such as Aldi and Lidl are set for decent growth in the UK, with experts predicting that an overall rise in spending will offset any substitution towards pricier retailers as the economy recovers.
“With consumer confidence at its highest point in many countries since the global recession and economic growth expected to continue… We expect the extra cash at consumers’ disposal to translate into higher sales for retailers,” Sven Reinke, a Moody’s vice president, said today.
“Even as disposable incomes begin to rise, we see a shift towards value players across Europe, indicating a permanent change in consumer behaviour.
“We expect that consumers will choose to spend more on luxuries and treats like holidays than revert to their pre-downturn spending habits.”
Reinke forecasts UK retail spending growth of 1.5 per cent over the next 12 to 18 months.
Discount retailers have been gaining ground on Britain’s established supermarkets as the recession pushed consumers to seek out greater value. But now they are expected to maintain, and perhaps still increase, their share of the market as the economy grows and real incomes rise.
Earlier this year, Aldi overtook Waitrose in terms of market share and is now Britain’s sixth biggest supermarket.
“There is no going back, the genie is out of the bottle,” Clive Black, a senior analyst at Shore Capital, told City A.M.
“The limited assortment discounters, after 15 years of trying, have firmly found their feet in the UK thanks to the combined complacency of the majors.”
Bruno Monteyne, a senior analyst at Bernstein, told City A.M.: “Hard discounters are still adding a lot of extra space which allows them to grow for several more years.”
He believes discounters will see their market share grow to around 15 per cent of the grocers’ market by 2020.