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Hypermarkets, supermarkets, mixed retailers, convenience stores and discounters are the distribution channels that have been long used by grocery retailers in United Kingdom. There are many non-store retailing channels which include vending, direct selling, internet retailing, home shopping etc. The distribution channel contributing the most to the grocery retailers market in 2016 has been the ‘discounters’ who have been expanding with an impressive value growth.

The consumers are also becoming increasingly price-conscious that has helped the discounters channel to grow. The discounters have well provided the cheapest products to consumers like lobsters being sold by Lidl at just GBP2.99. Another reason for the growth is that there is a focus on luxury discounting and also the store network of many of the leading companies is expanding.

J Sainsbury Plc, Aldi, Lidl Ltd, Tesco Plc and Marks & Spencer Plc are some of the leading grocery retailers in United Kingdom with the leader being Tesco Plc. The company uses a variety of distribution channels for selling its products including hypermarkets, supermarkets and convenience stores along with some forecourt retailers. The store also has came across a lot of price cuts recently which resulted in a loss in value share. The company also closed many of its underperforming stores and shifted its call centre operations in one place. This led to a further reduction in sales volume of the company. Despite all this, the company has been viewed recently to increase the workers’ pay by 10.5% which means they will now be more dedicated towards work and the company has also improved its maternity benefits. It feels this will help the company to acquire better talent as well as take better care of the needs of the employees. Even after the pay hike, Aldi has prolonged to be the highest paying grocery retailer in UK.

According to the report, “Grocery Retailers in the United Kingdom”, the recent developments have changed the market dynamics. There is increasing competition in the market with the coming in of German discounters which are gaining popularity rapidly. Currently, internet retailing of groceries is also capturing a larger market share.

United Kingdom is considered the most mature market for online groceries in the West but the share of internet selling is still very small. Ocado is the biggest online-only grocery retailer in the United Kingdom but is very far behind when compared to the online sales of major supermarkets. This scenario is expected to change with the acquisition of Whole Foods by Amazon. Amazon is an e-commerce giant which is expected to start selling groceries through physical stores. This will further augment the online sale of groceries as well as give tough competition to other companies with a physical presence.
The consumers have been seen as turning greatly price conscious. They are demanding better service, more value and greater convenience. The companies are trying to keep up with the changing consumer demands in order to retain and grow their consumers. Discounters, convenience stores and internet retailing are the three channels which are expected to grow rapidly in the future.

Many of the retailers are also focusing to aggressively market their brands especially via social media platforms. The growing competition may further lead to a reduction in prices offered by the grocery retailers. They may adopt product mixes of discount as well as premium priced products which will permit them to cater to demands by a wider consumer base in the coming years.

To know more about the research report:

Ken Research
Ankur Gupta, Head Marketing & Communications

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