Sunday, 21 September 2014

Discount chains benefit as slowdown bites

A new report by leading market research company Nielsen shows that the sharp slowdown in the economy over the last six months has had a significant effect on the behaviour of consumers.

The two German discount stores – Aldi and Lidl - have enjoyed a 40% expansion of trade since January. While in part this reflects the effect of more stores (up seven percent over the same time), it is mostly through attracting new shoppers or greater spend per shopper through their existing stores.

For a basket of 15 items, prices at the discount stores are on average half of those in convenience stores. Households are also turning to private labels goods in greater numbers, at the expense of more expensive branded products. Private label goods are on average 33 percent cheaper than brands.

Private label goods are still under-developed in many product categories such as confectionery, bakery, alcohol, health and beauty, and could have much more growth to come;

According to Alan Purcell, Head of Marketing at market intelligence firm Nielsen who conducted the research, “There has been a significant decline in the overall level of consumer spending over the last six months. Our research shows how consumers have been responding to the recession in terms of the stores they visit, and the products they are buying. The report clearly shows that there have been some considerable changes in behaviour over the last six months.”

The two discount stores Aldi and LIdl now have 160 firms throughout Ireland between them, an almost threefold increase in five years. The main casualty of this increase has been convenience stores, both independent stores and chains. The major supermarket chains other than Aldi and Lidl have also experienced pressure on sales as consumers look for value in the market. The products that consumers seem to be buying in the German discounters are frozen food, bakery products and other general groceries.