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Evolution of Hard Discounters in Europe
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Evolution of Hard Discounters in Europe

Rapidly changing customer needs are forcing food retailers across Europe to adapt continuously. The focus is on the growth of e-commerce, the transformation of large retail spaces and, in particular, the race of discounters.

With a total sales growth of 5.7% compared to the previous year, discounters in Europe have grown rapidly and currently already account for 23% of the entire FMCG landscape. The current drivers are clearly the UK and Eastern Europe.

Rapidly changing customer needs are forcing food retailers across Europe to adapt continuously. The focus is on the growth of e-commerce, the transformation of large retail spaces and, in particular, the race of discounters.

With a total sales growth of 5.7% compared to the previous year, discounters in Europe have grown rapidly and currently already account for 23% of the entire FMCG landscape. The current drivers are clearly the UK and Eastern Europe.

Germany, France, Italy, Spain and the Netherlands, on the other hand, are on a moderate course. Discount retailers are consolidating their portfolios here, which in turn will lead to a reduction in the number of shops.

Throughout Europe we observe the following four stages of discounter evolution, relevant also in Switzerland:

  1. Market entry under weakened or changed economic conditions.
  2. Growth thanks to low-price strategy supported by new store openings.
  3. Securing market share through customer focus and investments in quality, price, advertising and social media.
  4. Ultimately, sales and visitor frequency will be boosted by expanding the range of fresh products and redesigning stores in the direction of modern supermarkets.
     

And yet the origin of a low-cost operating model with a limited product range and a high proportion of private labels remains.

In Switzerland, thanks to massive investments in store design and the expansion of their product ranges to include fresh and local products, discounters have succeeded in building up an image of “smart discounters” with a Swiss touch. Nevertheless, the current sales relevance in Switzerland, at 20%, remains below the European average of 23%. This may be partly due to the current slowdown in new store openings (shop expansion in 2017: 1.1% in Switzerland vs. 8.5% in Total Europe).

Different countries are at different stages of this journey, and in some countries the journey is disrupted by strong local competition. However, across Europe, discounter sales growth is significantly faster than in supermarkets and the direction of travel is broadly comparable.

Source: Nielsen European Discount Book 2018