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UK Insights

What now for the discounters?

Simon Johnstone

Senior Analyst

Retail 20.01.2016 / 09:00

Shopping carts

Kantar Retail looks at what 2016 might hold in store for Aldi and Lidl

With the announcement by Kantar Worldpanel in November 2015 that Aldi and Lidl have reached a combine UK share of 10%, the discounters show no sign of stopping. They have plans to widen their reach of the British population by opening over 40 stores a year each. An article in the Telegraph quotes figures from Barbour ABI which showed Aldi and Lidl had submitted planning applications for 171 new stores (93 for Aldi, 78 for Lidl) compared to just 29 for Tesco, Morrison's, Sainsbury's and Asda combined.  

Until now Aldi and Lidl have been united as they take on the big four supermarkets in the UK, but for how much longer will this harmonious relationship continue? Both compete head to head in several markets across Europe, with the biggest battle taking place in their native Germany. Whilst German shoppers do make a clear distinction between the two, many British shoppers still don't see a big difference between the two offers. There are still enormous opportunities for Aldi and Lidl to attract new shoppers who still shop at the big four, but the question of how to differentiate themselves from each other will become increasingly important in 2016 and beyond.

Traditionally, Aldi and Lidl had large store footprints, a limited assortment of goods, with basic décor and a heavy use of pallets. Locations and store formats are becoming more sophisticated with Aldi and Lidl, showing a concerted effort to operate and succeed in urban areas through new locations & new store types. At the same time, they are investing in refurbishing and extending traditional stores to create an improved shopper experience and increase their overall assortment.

As the two brands continue to grow they will begin to encroach onto each other's territory more and more. This will increase the need to differentiate from one another especially in areas like London, where both have ambitious expansion plans.  So far Aldi has done a better job adapting its offer to cater to proximity shopping needs with Food-to-go, different pack sizes, desk-only checkouts, shrunken non-food range and relatively high participation of brands. The desire to differentiate themselves will see both trial new initiatives in 2016. Aldi has already announced it launch an online wine store in early 2016 and Lidl will likely follow suit with their own British ecommerce offer. This highlights the difficulty both have, as they try to differentiate from one another. The dynamics of discounters competing head to head mean more often than not they end up mimicking one another in their attempt to differentiate.

Source : Kantar Retail

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