In a difficult year for retail stores, one channel that is seeing the largest growth in shopper activity is deep discount grocery stores (not inclusive of dollar stores) according to Nielsen Homescan panel data. Between 2011 and 2016, store counts of deep discount grocery stores increased by 17.6%. Included in this group would be stores such as Aldi, Save-a-Lot and Lidl (which opened its first U.S. stores this summer).
So why have these stores seen such growth despite having a smaller footprint and limited product selection as compared to other grocery stores? According to a spokesperson for Aldi (which has 1,600 stores in 25 states), the formula isn’t complicated. Aldi has been successful due to its low prices but also providing value and quality which keeps their customers coming back. Aldi maintains low costs by focusing on food and bypassing grocery in store services such as banking and pharmacy.
Like Aldi, the focus on food at discounters has been done through their private label brands. This has been the key factor in winning over shoppers from other channels, especially millennials, who have fewer stigmas about private label items as compared to older generations. Discount retailers have more than twice the share of store brand dollars (49%) compared to 15% in mass merchandise and 20% in supercenters.
While discounters are reaping the benefits of having a strong brand presence within their stores, opportunity for growth continues to rise. Discounters are expected to grow at five times the rate of traditional grocers in the next three years. This provides little time to be reactionary. Instead, retailors must have a strong growth strategy in place to remain relevant and provide consumers the value and quality they are looking for at the right price.
You’ve heard our thoughts… We’d like to hear yours
The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].
Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.
This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.