Even though the European economic situation seems to improve, discounters will keep growing and according to a recent report, the Schwarz Group (Lidl's parent company) will become the largest group in Western European food retail by 2018.
Power shift next year?
According to the German discounter's most recent numbers, published in April, Schwarz has a 74 billion euro turnover last year through Lidl and Kaufland, with its aggressive price tactics and its compact hypermarkets. That is a big increase (+ 13 %) compared to the year before, when it managed 65 billion euro.
If Schwarz can keep up this pace, it will surpass large retailers like Tesco and Carrefour in Europe, according to David Gray, PlanetRetail's retail analyst. "By 2018, according to our forecasts, Schwarz Group will overtake Carrefour as Western Europe's largest grocery player, generating sales of more than 80 billion euro. This is an unprecedented power shift in European retail, fueled by the near-unstoppable growth of the format across Western European markets."
The majority of the group's total turnover comes from Western Europe. "We estimate Schwarz's current Western European turnover to be 64.6 billion euro, including numbers from Lidl and Kaufland. If both formulas keep up their current growth pace, 80 billion euro could be reached before 2018, even within a year or a year and a half."
Discounters become service supermarkets
Gray believes there are several reasons for the success, things that discounters like Aldi (mostly Aldi Süd) and Lidl have done before: open stores in city centers (mostly in the United Kingdom) and more focus on fresh foods and brands in their product range. That transforms them into service supermarkets without sufficient distinguishable capabilities to get loyal customers.
"The discounter branch will grow 4 % each year until 2018, while Schwarz will surpass the average growth rate with 5 % per year. Hypermarkets and superstores, as a way of comparison, will only grow 2 % per year", Gray said. That is why established Western European retailers, like Carrefour and Tesco, should not rely on their habitual formats, if they wish to counter the rapid discounter growth.
New formulas will have to be used to buckle the trend: convenience retail is a flourishing branch and one of the fastest-growing retail channels, in France but mostly in the United Kingdom. Half of the 10 largest Western European convenience retailers are British, while plenty of additional convenience formulas will be launched in Western Europe over the coming months, mainly through large retailers like Tesco or Carrefour."