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What’s happening in discount retail?

British shoppers love a bargain, as the rise of Lidl, Aldi and Poundland has proved. Since these discount retailers opened in the UK in the early 1990s, Britain has been through a deep recession, which accelerated their success. Today, the high street is packed with discount stores, from B&M Bargains to Savers; the discount market is set to reach £32.5 billion next year.

While it seems as if there’s no stopping these bargain behemoths, their market share could be threatened by newcomers and after-effects of the pandemic. We discuss the latest happenings in the world of discount retail, and what they could mean for market leaders like Aldi and Lidl.

To be online or not to be

Until the pandemic, Aldi and Lidl were unstoppable. In a January 2020 survey, 67% of 1000 people said they’d shopped in one of those stores in the last month.

This pair had long surpassed Asda and Morrison’s as the ‘cheapest’ supermarkets. Where once there was a slight stigma to shopping in discount stores (90s kids might remember the mortification of being given your PE kit in a bright yellow Netto bag), today people are proud to shop in Aldi and Lidl. Quality perceptions are high, thanks to a slew of awards, and it’s cool to be a savvy shopper.

Then the pandemic happened, and one of the factors that helps these stores stay cheap became their biggest barrier to serving customers – no online offering. Just as Primark decided to sit out the pandemic, so Lidl decided the costs were too high. While Aldi doesn’t offer an online delivery either, it does now offer a ‘click & collect’ service and it has partnered with Deliveroo in some postcodes. (Similarly, Poundland is trialling online delivery in certain areas.)

Click & Collect, Aldi

The Financial Times recently reported that while both Aldi and Lidl are expected to recover as social restrictions are lifted, they will face tougher competition from the big four supermarkets, who are lowering prices.

Discount disruptors

There’s a real buzz about Mere, the Russian discount chain that’s opening four stores in the UK this year with plans for 300 more. Apparently, prices will be 20-30% cheaper than Lidl and Aldi.

Mere’s philosophy isn’t so much ‘pile ‘em high and sell ‘em cheap’, as just ‘pile ‘em high and leave ‘em to it’; customers have to remove products from pallets themselves, and Mere only pays suppliers for what is sold.

The Russian ‘Lidl’ equivalent has steadily been expanding through Europe, and now runs stores in Bulgaria, Italy, Spain, Greece and most recently, France.

Mere

We’re keeping our eye on another discount store expanding through Europe and now operating just across the Channel – Action. The Dutch retailer sells non-food products and is owned by a British equity fund. Watch this space.

Closer to home, Maxisaver launched last summer, offering convenience-style stores with low prices. While corner shops have been invaluable during the pandemic, as small retailers they’re not able to offer low prices and so customers are less likely to use them for bigger shops. Maxisaver has filled the niche as a value convenience store, and is planning to open 20 stores by the end of this year.

Is the UK ready for Mere discounts?

Lidl and Aldi have graduated from disrupters to joining the ranks of the UK’s six biggest grocers; compared to Mere, they’re more low-frills than no-frills.

The question is, will British consumers take to Mere’s new way of shopping? While Brits love a bargain, we’re also notoriously slow to adapt to new ideas (put your hands up if you still get annoyed at the self checkout) – and Mere looks much more austere than any other UK supermarket. Then again, perhaps that’s exactly why Mere set its sights on ‘austerity Britain’.

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