Challenging times in the grocery market

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Not so long ago they were seen as the white elephant in the retail portfolio, but, it appears, there could be a future for hypermarkets.

Malory Davies FCILT, Editor.

Malory Davies FCILT, Editor.

A study by the IGD suggests that hypermarket sales could grow by one per cent over the next five years. That is hardly stunning, but the IGD suggests that investment in the big store experience is paying off for the UK grocery giants.

Nevertheless, the study highlights the rate at which the grocery market is changing. The big winners are online, which is expected to grow by 54 per cent between now and 2022, and the discounters which are forecast to increase sales by 50 per cent over the same period.

IGD chief Joanne Denny-Finch highlights the changes in consumer buying habits: “We’ll be more spontaneous but also better planned. We’ll be experimental, eager for new products and experiences. But we’ll also have perennial favourites, staples that we’ll buy on subscription. A quarter (24 per cent) of British shoppers say in the next two to three years, it’s likely they will use an online subscription service to get their staples delivered.”

Overall, the grocery market is forecast to grow by 15.5 per cent over the next five years to £213 billion by value. Supply chains are going to have to accommodate that. But the big growth in volumes will be in the online sector as well as the convenience sector (which is forecast to grow by almost 18 per cent).

Serving the home delivery market (and, for that matter, small stores) is expensive for retailers compared to supplying traditional supermarkets and hypermarkets. And, of course, the retailers have a huge investment in the these stores.

So it is no surprise that retailers are working to improve the big store experience including non-food concessions, local independent food stores and an ‘everyday’ aisle near the front of the store, to enable a speedier shopping experience.

Managing this changing balance is bound to be a challenge for the big grocers, and it’s a reasonable assumption that they are going to be looking back along the supply chain to their suppliers to step up and play their part in new look supply chains.

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