Between 2012 and 2016, Aldi and Lidl have doubled their UK share from 5% to 10%. Would we have predicted that? And what might life look like for Aldi and Lidl by 2020?
Actually, the discounters have grown considerably more than we might have predicted back in 2012. There are a number of growth levers that Aldi and Lidl have pulled: shoppers (number of people); frequency (how often people chose to go); and basket size. In 2012, it took Aldi and Lidl 52 weeks for 57% of the population to walk through the door, it now takes only 12 weeks. There has been a 23% increase in the annual number of shoppers the discounters have attracted over the course of four years. Frequency has jumped by 17%, the average shopper now visiting 28 times over the course of the year. Basket size has increased even more, up by 47% in four years, reflecting range improvements, especially in fresh categories sitting in the chiller cabinets.
Current 2016 growth is coming from both baskets and trolleys. The discounters have grown basket sales by about 10% over the past year, but the real growth engine is trolleys, up an extraordinary 28%. And that growth is sourced from big box retailing – people switching from a main shop in a large store to a main shop in a discounter.
When we model where discounter shares will end up in 2020, there are three things to consider, new store openings, how these will increase penetration, and how big shopping baskets are likely to be.
Aldi and Lidl are proposing to open at least a new store a week each. This will pull the penetration and frequency levers, however store openings will not be as incremental as in the past. New openings will be more cannibalistic of existing estates than before, and so far Aldi and Lidl haven’t had to compete head on with each other to any great degree.
Aldi already have the largest basket size in the market, and Lidl are catching up quickly, so basket size growth won’t be such a driver in the next 4 years as it was in the past. On this basis we predict a 14% share of the market for the discounter in the UK by 2020. But remember we would have got it wrong if we’d make a 2016 prediction back in 2012, as the retail world has the habit of springing surprises!