The relentless march of the hard discounters across continental Europe threatens to seriously dent the power of major branded suppliers and further commoditise consumer products over the next decade, according to a report from Deloitte.
Although the likes of Lidl and Aldi have so far failed to make major inroads into the UK market, the report - entitled ‘2005: Global Powers of Retailing’ - claims that their success on the continent has “stunned and exasperated” Europe’s leading food retailers and created a new competitive challenge for non-food specialists.
The fact that nearly all the top
hypermarket operators have responded by developing new or improved own-label value ranges and formats was also testimony to the discounters’ threat, said Deloitte head of consumer business practice Richard Lloyd-Owen, while the pressure on big brands was only going to intensify.
“Brands are not going to disappear, but you only have to look at the results of some of the major players recently to see that they are feeling the pain.”
The pressure on the big players to keep growing would also fuel up to £10bn in mergers and acquisitions activity in 2005, he predicted.
For retailers such as Tesco, which has moved up from eighth to sixth place in the global retail ranking by turnover this year, growth would come more from diversification at home and continuing moves into emerging markets as regulatory restrictions and market saturation thwarted growth in mature markets, said Lloyd-Owen.
Although China, Japan and Russia remained the biggest areas of opportunity, India was probably next on the shopping list, he predicted. “India, this nation of one billion people, has lately become the next big thing in the global economy. There is a huge and growing middle class, which, interestingly, has been partly fuelled by all the off-shoring from IT companies and call centre operators. All this is stimulating foreign investment.”
The fragmentation of the Indian retail market, in which just 1% of turnover was generated by organised retailers, was an exciting but daunting prospect for a newcomer, he said. “There are huge challenges for anyone going in - no coherent planning environment and a lack of market intelligence, for a start. But also potentially huge rewards.”
Elaine Watson