Discount and budget retailers race to overtake ‘big four’

The big four supermarkets are currently facing growing pressure from a spectrum of competitors. This includes cheap retailers like Home Bargains and Poundland, frozen food specialists Iceland and Farmfoods, and European budget supermarkets Lidl and Aldi.

In the past five years, the number of budget stores has increased by 48% as consumers become savvier about the advantages of budget-friendly shopping. This now presents a serious threat to grocery giants, as continual price wars are eating into their profit margins.

Industry leaders Tesco and Morrisons have resorted to laying off employees, closing stores, and even deserting plans of new branch openings. Sainsbury’s, meanwhile, has postponed business developments to reduce expenses.

While the large players struggle to compete with the new trend, their discount rivals continue to multiply, opening more than five retail stores per week. This amounts to a total of 4,217 budget chains in the UK.

In contrast, Tesco, Morrisons, Sainsbury and Asda have 582 full-sized supermarkets, with a total of 2,316 outlets. Despite the difference in the sheer scale of a supermarket compared to an average pound shop, the figures still prove the smaller chains are growing in power.

Experts describe the shift as the biggest to hit the grocery industry since the 1950s. This change will bring a new future to consumer shopping as supermarket leaders are forced to reorganise their operations. Consumers are predicted to benefit from a continuing decline in grocery prices after last year saw them tumble by a significant 3%.

Just this May, Aldi and Lidl defeated Tesco and Asda in a tasting test conducted by The Grocer Magazine. The supermarkets were awarded a total of 13 gold medals as part of the magazine’s Own Label Food & Drink Awards, something that wouldn’t have been thought possible just a few years ago.

The Local Data Company released figures showing that 53% of discount store customers are recorded as being middle or upper class – a significant increase from 37% of the previous year.

In 2014 alone, the growth of discount chains was twice as much as the big four establishments, leading LDC director Matthew Hopkinson to conclude that supermarkets are losing sales to their discount rivals and will likely continue to do so.