James Russell, commercial director at Rowan International, considers the rise of the discounters and what wholesalers can learn from them.
The grocery convenience market is in its biggest transition for years, driven by the rise of discounters.
Wholesalers, too, can continue to flourish by leveraging their insights and collaborating to deliver a plan that works for the end consumer.
I’ve been privileged to have worked as both a supplier and a wholesaler, and while there are as many differences as there are similarities, success is always driven by the right decisions around investment. Whether it is a matter of focus, resource, time, equipment or cash, channelling investment in the right way is the key to unlocking sustainable growth.
It’s no secret that the discount sector has undergone a significant transformation with unprecedented growth over the past few years, as the likes of Aldi and Lidl have continued to take major market share from the big four. However, this doesn’t signal the death knell for established retailers and wholesalers. What it does is signal that consumer needs are evolving faster than before and that there are significant opportunities for those across the wholesale spectrum.
Consumer shopping habits have changed. The ever increasing cost of living has driven shoppers into discount stores but the quality and accessibility of the format has kept them going back for more. We carried out in-depth industry research with the IGD that revealed that 85% of discount users plan to continue using the channel, even as their financial circumstances improve. Discounters are also attracting a broad range of consumers with 77% coming from the ABC1 demographic groups.
What we’ve learnt from this is that many people who would previously have done one weekly shop are now shopping more often and using discount stores for some of their grocery needs. As a result, a growing number of food and household goods companies are recognising the discount channel as an opportunity, encouraged by the impressive growth and the high volumes that brand-focused discounters are capable of delivering.
So what? We’ve seen the multiple grocers drive ranging and display decisions through consumer insights for years. Traditionally, convenience has been able to leverage some of these learnings, but how applicable these are in independent outlets remains to be seen. The key moving forward is to ensure retailers are using industry insights to make informed business decisions. Retailers can no longer rely only on consumer insights but must combine historical sales data with ‘big data’ to create valuable industry knowledge.
Finding the sweet spot of consumer insight, sales, pricing and range analysis is the key to enhancing sales opportunities. How many of your promotional activities deliver what they set out to achieve? More importantly, how do they add to the bottom line? Retailers and wholesalers are at the forefront of understanding consumer needs, preferences and attitudes, but how often do we overlay this insight with broader macro insights? How often do we leverage these insights, driving real action? More importantly, what gets in the way? Is it a lack of vision, trust or resource?
In any case, we won’t realise the full potential for growth as an industry unless we can find ways to pool our knowledge – as suppliers and wholesalers – and create solutions that are applicable for independent retailers, whatever their channel.
Given the varied make-up of the discount sector – there are more than 7,500 discounters in the UK, from large supermarkets to tiny market stalls – understanding the sector is a full-time job. The discount industry no longer focuses purely on moving promotional, out-of-date or residual stock, so working to strategically place products on shop shelves, enhance the product offering and enable stores to keep up with the competition is paramount.
By taking a strategic approach to the discount channel and using industry insights to make informed decisions, brand owners can increase penetration, volume and value without affecting brand equity. With assistance, retailers can leverage insights, delivering in a way that not only works, but is aligned with the core needs of major brands – brands without which we’d have no truly sustainable business and that’s no good for any of us!