The biggest issue facing this industry is the same as it was this time last year how to generate top line growth when the market is under huge deflationary pressure that is destroying value in many key categories.
It was the main talking point at IGD's convention last year, and it was high on the agenda for the industry's top bosses when they gathered in Berlin last week. As our report on page 29 shows, many European operators are clearly concerned about what has happened in Germany, where discounters reign supreme and value growth has become something of an abstract concept. Their biggest fear? That the German disease' is spreading and more countries are being infected.
It would be wrong to draw too many parallels between what is happening in Germany and what is happening in the UK the retail experience in both markets is completely different. Over there, retail is very low on value, quality, innovation and service. Over here, things are very much better than that. Sure, British consumers are price-conscious, but they are more demanding than their German cousins.
Nevertheless, you can see why so many grocery people are worried. The UK market is polarising between those players, such as Asda and Tesco, with the ability to operate on some form of EDLP platform and those, like Waitrose and M&S, who have built up defendable niches from where they can see off the advances of these low price retailers. Those caught in the middle continue to find life pretty tough although a decent set of results from Sainsbury this week demonstrates it may yet be able to build an alternative model for success.
Whatever, the real worry now is that, as every retailer acknowledges, the market is getting tighter as consumers become more cautious about their spending. If that means a return to more normal rates of growth, we can expect competition between the top chains to intensify. If that happens, the deflationary pressure being felt right across the market will inevitably get worse.
The result? Not quite a German-style meltdown this year. But for some it is going to be a pretty bumpy ride.
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It was the main talking point at IGD's convention last year, and it was high on the agenda for the industry's top bosses when they gathered in Berlin last week. As our report on page 29 shows, many European operators are clearly concerned about what has happened in Germany, where discounters reign supreme and value growth has become something of an abstract concept. Their biggest fear? That the German disease' is spreading and more countries are being infected.
It would be wrong to draw too many parallels between what is happening in Germany and what is happening in the UK the retail experience in both markets is completely different. Over there, retail is very low on value, quality, innovation and service. Over here, things are very much better than that. Sure, British consumers are price-conscious, but they are more demanding than their German cousins.
Nevertheless, you can see why so many grocery people are worried. The UK market is polarising between those players, such as Asda and Tesco, with the ability to operate on some form of EDLP platform and those, like Waitrose and M&S, who have built up defendable niches from where they can see off the advances of these low price retailers. Those caught in the middle continue to find life pretty tough although a decent set of results from Sainsbury this week demonstrates it may yet be able to build an alternative model for success.
Whatever, the real worry now is that, as every retailer acknowledges, the market is getting tighter as consumers become more cautious about their spending. If that means a return to more normal rates of growth, we can expect competition between the top chains to intensify. If that happens, the deflationary pressure being felt right across the market will inevitably get worse.
The result? Not quite a German-style meltdown this year. But for some it is going to be a pretty bumpy ride.
{{COMMENT & LETTERS }}
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