German-owned discount supermarkets Aldi and Lidl are plowing ahead with a rapid expansion in Britain and are on course to grab more market share from the traditional big four players.
Meanwhile, store openings at market leader Tesco (TSCO.L), Sainsbury’s (SBRY.L), Asda (WMT.N) and Morrisons (MRW.L) have slowed to a trickle. They are shedding thousands of jobs so they can save money and better compete with the discounters.
Aldi and Lidl’s cut-price model have turned them into two of the world’s biggest retailers. They have expanded abroad as growth stagnated at home.
Aldi launched in Britain in 1994 and Lidl in 1990 and they have changed the shape of the UK grocery market.
But their profits have fallen and traditional retailers have questioned whether the model is sustainable. The discounters also have little presence online and could face competition there from the big four and grocery newcomers such as Amazon (AMZN.O).
For now, Aldi and Lidl’s combined share of the 200 billion pound ($283 billion) UK grocery market is set to grow. It will be 15 percent by 2020, up from 12.1 percent currently, according to Ashley Anzie, strategic insight director for grocery at researcher Kantar Worldpanel.
“That’s largely driven by the fact that Aldi and Lidl will just physically be opening more stores,” he said.
Aldi and Lidl are also modernizing existing stores and making a push into premium ranges that chimes with British shoppers, who, squeezed by inflation and subdued wages growth, have become more cautious in their spending.
“What we’re doing is investing very carefully in things that add to our customer offer, our store portfolio, our infrastructure,” Jonathan Neale, Aldi Managing Director Buying, told Reuters.