The Rise and Rise of the Budget Supermarket

Supermarkets in the UK

For many decades, the landscape when it came to supermarket shopping in Britain was largely unchanging. The vast majority of people would regularly shop at one of the big four supermarkets of Tesco, Sainsbury’s, Asda or Morrison’s, whilst a small sector of society favoured higher end alternatives such as Waitrose or Marks & Spencer’s.

Whilst those big four names are still dominant, however, things have changed dramatically in the last five to ten years with the emergence of budget supermarkets such as Aldi and Lidl. In fact, so notable is the change that it demands we take a little time to analyse it more closely.

The Meteoric Rise of the Budget Supermarkets

According to statistics compiled by Kantar Worldpanel – an international company specialising in consumer information – Aldi’s share of the British supermarket market in August 2014 stood at 4.8% whilst Lidl’s numbered 3.6%. In May of 2017, however, those two figures had risen sharply to 6.9% and 5% respectively.

That represents a dramatic and a rapid rise in popularity, and means that Aldi is now in fact the country’s fifth most popular supermarket and Lidl is challenging for sixth spot. That begs the question, then, of just what has been behind that meteoric rise to prominence for the budget brands?

Good Value Not Low Cost

When considering the recent success of budget supermarkets, it’s easy to simply conclude that their lower costs have become more attractive as the many peoples’ economic circumstances have worsened. That is far too simplistic an explanation, however, as cut price shopping options have always been available but have never gained as much traction as the likes of Aldi and Lidl have in the last few years.

It is more informative, therefore, to look at the issue of value rather than cost when considering the recent budget supermarket boom. In 2015, for instance, German consulting and marketing firm Simon-Kucher& Partners claimed that in the case of budget supermarkets ‘quality is about 10% lower than classical brands but the prices are 30% lower’.

Such supermarkets, therefore, demonstrably deliver better value for money. That isn’t the end of the story, however, when it comes to explaining their success.

Retail Tactics

Alongside offering comparatively better value for money to consumers, there are also a number of other things about the business model of budget supermarkets that help them to employ more successful retail tactics.

Firstly, budget stores like Aldi and Lidl employ a strategy that targets shoppers who buy little and often, rather than those who undertake a large weekly shop. As such, the shops carry a more limited range of products meaning that they have less capital tied up in stock but are able to still offer goods of comparable quality.

Alongside this, budget supermarkets also avoid stocking big name brands and instead offer less well known alternatives or produce their own versions of products.This means they also avoid paying the mark upsassociated with carrying the big brands.

Dodging significant costs in those two ways, what’s more, allows budget supermarkets to supplement their main range of products with a few higher end alternatives to further attract those customers who may otherwise have not considered shopping with them.