Supermarkets must deliver value in its various forms if they are to see off discounters, says Siân Harrington

Discounters may appear the biggest challenge to European retailers, but dig deeper and shoppers’ rising expectations of value for money are in fact driving growth in the EU food industry.
This is the conclusion of the Coca-Cola Retailing Research Council Europe’s (CCRRE) 11th study. The report examines the impact of discount on the viability and future of traditional supermarket retailing --and delegates at last week’s ECR Europe conference in Paris were given a sneak preview.
Nick Veropoulos, CEO of Greek Spar retailer Veropoulos, said almost half of all new stores opening in Europe are now discounters. This equates to 3.5 discount stores opening every day. Across Europe, discounters now have a market share of 15% and more than 30,000 stores.
This expansion is driving the sector’s growth, said Veropoulos. “Aside from in Germany, hard discounters have negative like-for-like sales. But the rate of new stores opening more than makes up for sluggish same-store sales,” he said.
Once shoppers experience discounters, they become 10% less loyal to traditional grocery retailers, according to the CCRRE research conducted among 10,000 shoppers across the UK, France, Germany, Italy and Poland by McKinsey.
Shoppers who never use discounters spend 69% of their grocery income in traditional stores. Those who sometimes visit discounters spend 62% in traditional stores, while the figure drops to 59% among shoppers who regularly visit discounters. However, discounters are not the only ones delivering on value. Only in France and Poland do shoppers place discounters number one for value. In both the UK and, surprisingly, Germany consumers put hypermarkets top for value, while in Italy supermarkets took first place. In the UK, discounters come second, with multi-format grocers third.
“Discounters are not unstoppable. But it is essential we deliver value to shoppers before discounters do it,” said Veropoulos.
McKinsey found seven shopper segments in its research. All define value as the most important factor but the definition of value differs and it is this that is the key to succeeding against the discounters. “The pure price and value hunter segments equate to 20% of the European market and these shoppers are more likely to shop in discounters,” said Dominique Reiniche, president of Coca-Cola Europe. “This means 80% of the market is still ours to fight for.”
And in the UK pure price shoppers make up just 4% of the market with value hunters 8%, leaving 88% of shoppers for whom value but not price is most important. Even in Germany, the most price-sensitive country, more than half the market is up for grabs. But only 30% of pure price shoppers across Europe fall in the lowest-income group, which might explain why even discounters are now starting to introduce brands.
As discounters continue rapid expansion, more shoppers will experience them. And as research by WPP-owned internet panel Lightspeed shows, even in the UK those that shop in discounters have a positive view of the experience and would recommend them to family and friends.