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What next for UK supermarkets?

Convenience stores and online new battlegrounds for UK grocery market

GENERAL MERCHANDISE

What next for UK supermarkets?

• Food & grocery set to increase 3.4% to £124bn in 2010, its slowest rate since 2006
• Lower food inflation combined with cautious consumers will dampen growth
• With the top five players holding 64%of the market, customer loyalty is essential to growth
• Retailers need to exploit growth potential provided by convenience stores and  online
Slowing growth in the food and grocery market will lead to a new phase in the war  for UK shoppers, as supermarkets take the battle online and local, finds a new report from independent retail analyst, Verdict.
 
Growth in the food and grocery market has slowed to its lowest level since 2006, with only online and convenience markets showing promising growth opportunities over the next five years.
 
Malcolm Pinkerton, senior retail analyst at Verdict, comments: “Increasingly frugal consumers and easing food inflation has seen growth in food and grocery slow to just 3.4% in 2010. Meanwhile, both convenience and online grocery shopping markets have gone from strength to strength.”
 
By 2014, Verdict is predicting online grocery sales to rise 81% from 2009 levels, to reach £7.4 billion. Over the same period, the convenience market is set to grow by 14% to reach £35.7 billion.
 
Malcolm explains: “With shoppers leading increasingly busy life-styles, the popularity of shopping online for the weekly groceries is on the up. This has a knock-on effect, increasing the need for top-up shopping in between deliveries. Changing demographics, including an ageing population and a rise in single occupancy households, are also leading to an increase in frequent smaller shopping trips, which is significantly benefiting the local convenience store.”
 
Over the next five years, retailers will have to exploit these changing trends and shopping habits to maximise growth opportunities.
 
Malcolm concludes: “Supermarkets will need to fight to establish their online and convenience presence and steal market share from rivals. Moreover, as competition intensifies among the major players, loyalty is set to be a fiercely fought battleground. Those able to balance the needs of consumers with value and deliver what they want will win loyalty and reap the rewards.”

The Retail Bulletin is organising their 2nd Multichannel Summit, to be held in London February 2nd 2011. The event is sponsored by k3 retail and will look at how retailers can maximize profits, market share and loyalty through cost effective, seamless, integrated multichannel strategies.
If you would like to attend as either a delegate or Networking Partner, go to www.retailbulletinconferences.com/multichannel2011

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