Despite aggressive discounting and competitive ‘members only’ offers for loyalty programme customers, traditional supermarkets continue to lose market share to discounter rivals, Aldi and Lidl, according to the latest research by Pricer, an in-store automation and communication solutions provider.
Original research of over 1,000 UK shoppers by Pricer showed that discounter switching remains rife, with 65 per cent now having switched some or all of their food shop to Aldi or Lidl, a rise of +4 percentage points year-on-year. Over half (51 per cent) said they had switched some of their food spend to the discounters, while 13 per cent said they now do their entire food shop with either Lidl or Aldi.
Younger demographics of shoppers were the most likely to switch to discounter supermarkets, rising to 79 per cent of Millennials, widely considered to be the generation most impacted by the cost-of-living crisis, and 78 per cent of Gen Z. Regionally, Londoners were the most likely to change their allegiance away from the traditional grocers and swap to Aldi or Lidl (81 per cent), compared to 60 per cent in the Midlands and 67 per cent in the North.
Supermarket loyalty scheme discounts don’t match discounter pricing
Despite falling food price inflation, consumers remain highly price- and promotions-sensitive, with 81 per cent of consumers polled by Pricer saying they remain cost conscious and over a third (35 per cent) saying they plan to remain economical with their food spend, even if their disposable income felt less squeezed.
In response, the traditional Big 4 supermarkets have focused their price matching efforts on offering larger discounts to loyalty programme members. However, last month Which? magazine’s price comparison report, which included supermarket loyalty scheme data for the first time, showed that despite Tesco Clubcard and Sainsbury’s Nectar card lowering the total basket price of a typical food shop, Aldi and Lidl both came out cheaper.
Ambitious store openings to compete on convenience
And, as well as competing on price, with their ambitious store opening plans, the discounters are also increasingly competing on convenience as they look to accelerate their store footprint.
Aldi, for example, is set to invest £550million in opening a further 35 UK stores in 2024 alone and, having opened its 1,000th branch in Woking last year, is targeting reaching 1,500 stores. Meanwhile, earlier this year, Lidl announced plans to open ‘hundreds’ of UK stores as it looks to reach more customers, with its Chief Development Officer, Richard Taylor, saying the retailer “ultimately sees no ceiling on [its] ambition or growth potential.”
Diffracted supermarket loyalty driven by price, choice and quality
Pricer’s poll showed that 42 per cent of consumers are choosing to shop in a greater number of supermarkets compared to a year ago, with Gen Z (66 per cent) and Millennials (64 per cent) again the most likely demographics to display more fickle food shopping behaviours.
Price (52 per cent) proved the top reason for those opting to shop across more supermarkets, however the range of choice (40 per cent) and quality (34 per cent) also featured prominently in consumers’ motivations for shopping around for grocery items. A third (33 per cent) said the choice of own brand or value ranges impacted their decision to shop across more supermarket brands, while 30 per cent cited better ranging of vegetarian or vegan produce and 18 per cent said access to higher welfare products was a key factor.
Peter Ward, UK Country Manager for Pricer, commented: “Overwhelmingly, our research shows a growing diffraction in supermarket loyalty among consumers. Largely driven by pricing and cost-sensitivity, this plays naturally into the hands of the discounters, which is why they’ve continued a steep growth trajectory, with Aldi already overtaking Asda as the UK’s third largest supermarket earlier this year.”
“However, while price remains at the fore, choice (both across branded and non-branded goods), quality and access to higher welfare produce are all also playing key roles in consumers’ motivations to shop around for their groceries, which gives traditional supermarkets another battleground on which to fight for share of wallet, rather than just a race to the bottom.”
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