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Aldi meets AmazonDigitalisation & Discount Retailers: Disruption in Grocery Retail

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Part 1: Grocery retail is attractive but changing

Introduction

Part 2: Discounters and online-retailers have the potential to shatter the market

Part 3: Focus on what your customer wants

You need to know who your customers are

You need to know which customers are crucial to the future of the market

Be aware that there are still obstacles that online grocery retailers have to overcome

Understand that digitalisation brings new opportunities and challenges

Like many markets, grocery retail is going through rapid digitalisation. This report, based on data from YouGov Profiles,

shows how grocery retail will develop and what brands must do to increase their market share.

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Use picture to take up dark grey space

Part 1: Grocery retail is attractive but changing

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Grocery Retail is an attractive and growing market but very competitive

164 169175 177 178 179 182 185 189 193 197

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Annual value of the grocery retail market in the UK from 2011 to 2021 (in billion GBP)1

19%

13%

13%

10%

45%

Tesco Sainsbury's Asda Morrisons Others

Source: 1https://www.statista.com/statistics/611361/grocery-retail-market-value-in-the-united-kingdom-uk/,

²https://www.statista.com/statistics/282070/distribution-of-the-grocery-market-in-the-united-kingdom-uk-by-retailers/

Many grocery retailers are competing for market share…

4

Four major retailers

are currently in the

leading positions

(2015)²

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But discount retailers such as Aldi and Lidl are having an increasing impact on the grocery landscape in Great Britain

Aldi and Lidl have doubled their market sharefrom 2011 to 2015, whilst the “big four“ are losing market share1.

Changing shopping habits and additional macro-economic factors have added to the success of the discounters like Aldi and Lidl.

1 Source: https://www.statista.com/statistics/282070/distribution-of-the-grocery-market-in-the-united-kingdom-uk-by-retailers/

2 Source: YouGov Profiles 2 Base: Nationally Representative GB adults aged 18+

of British customers use discounters at least once a week2.30%

The 30 % of British customers regularly using discounters has affected the

whole market leading to margin decreases at traditional supermarkets like Tesco, Sainsbury’s, Asda etc. which are under heavy price pressure.

25% 22% 19%

15%13% 13%

14%13% 13%

12%10% 10%

3%5% 6%

2% 3% 4%

29% 34% 35%

2011 2013 2015

Tesco Sainsbury's Asda Morrisons

Aldi Lidl Others

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In addition, ordering online at traditional grocery retailers has become common place – but there is still room for growth

…have already used online grocery

retailers at least once.

1 Source https://www.statista.com/statistics/282070/distribution-of-the-grocery-market-in-the-united-kingdom-uk-by-retailers,

2 Source YouGov Profiles

Base: Nationally Representative GB adults aged 18+

24%

29%

48%

51%

72%

Morrisons

Boots

Asda

Saisbury's

Tesco

You said you have ordered food or personal products via an online supermarkets/ online only

supermarkets. Which of the following brands have you ever used? (Top 5) 2

British consumers stick to shops they go into on a regular basis when ordering food online.

Online accounts for only 6% of the

whole sales of the grocery market in the United Kingdom1.

46%

6Base: GB adults 18+ that use online supermarkets/ online only supermarkets

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The market is still changing and customer shopping behavior is changing too

Use picture to take up white space

say that they use a certain shop type more or less often compared with two years ago.

75%

say that they will use a certain shop type more or less often within the next two years, compared to what they do now.57%

Source: YouGov Profiles


Retailers must reflect and respond to this development, otherwise they will not benefit from this ongoing change.

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Part 2 – Discounters and online-retailers have the potential to shatter the market

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Due to digitisation, grocery retail will change fundamentally because it offers new benefits for customers

46% have already used an online

supermarket or an online only supermarket…

Convenience83%

Choice of products79%

Punctuality of delivery32%

… and they really liked it.

Quality/ condition of products74%

They rate the following aspects positively:

9 Source: YouGov Profiles

Base: Nationally Representative GB adults aged 18+Base: GB adults 18+ that use online supermarkets/ online only supermarkets

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Discount retailers like Aldi put additional pressure on prices and margin and are speeding up this change

57% say that “discount supermarkets (Aldi, Lidl) are just as good

as the others (Tesco, Sainsbury’s, Asda etc.)”.

Without any other perceived differences, a smaller price will always be a decisive factor. This will lead traditional supermarkets to decrease their margin as well to be competitive.

This fight for the margin will affect the whole market; traditional retailers

will have to find other ways to differentiate themselves from discounters:

offering customers a special shopping experience, occupy new niches or

provide additional benefits.


Base: Nationally Representative GB adults aged 18+10

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If there are any firms that meet customer needs better, the existing structure will be shaken to the core – even for established grocery retailers

Just because Tesco, Sainsbury’s and Asda are the leading online shops in grocery retail at the moment, it does not mean that they will remain so.



This offers great potential for companies like Amazon and niche retailers that focus on certain products that meet the needs of the customers better.

Even Discounters can benefit from this development, since they already meet a major need: the price of the goods.

40%…say they do not buy

from online shops that

they also use in the “real

world”.

Tesco, Sainsbury’s or Asda – do you want to know how your customers

see this point in particular?

Additional data are available in YouGov Profiles.

For information click:

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https://yougov.co.uk/find-solutions/profiles/




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Discounters, digital retailers and disruptors need to adapt by focusing on the needs of their customers.

This does not mean “all online” but digitalisation offers an opportunity for retailers to get to know their customers in more detail than ever before and therefore meet customer needs better.

It will create value for customers: depending on their needs customer groups will need individual product choices, sales channels, and pricing strategies. Doing this will help your business.

This is exactly what YouGov Profiles can offer you: Get to know your target group with our innovative segmentation tool in the detail that you need to know in order to strategically prepare your business for the future.

Click:

Let us show you how the power of YouGov data can help you to understand the upcoming challenges of the grocery retail market.

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Part 3 – Focus on what your customer wants

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Overall, the most important demands of customers will influence the further development of the grocery retail landscape: Retailers need to focus on what the customer really wants

Price is the most important aspect for GB consumers, they rank this even higher than quality/freshness.

1. 2.3. 4. 5.

Offering good quality produce with a fair price is crucial, it will therefore be essential for your business to focus on these two aspects and sacrifice less important factors to be competitive.



2%: Don‘t know.

Shopping

experience

How customers rank their main demands for food retail (% show how many put the respective item on rank 1):

14

44% 37%

PriceQuality/

freshness

Convenience/

comfort

8%

Choice of brands/

products

8% 2%

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You need to know your customers as well as possible. Here is what is important to them.

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14

8

Largest choice possible of foodand personal goods

Large choice of other products

Smaller choice of the mostimportant products

71

20

16

Freshness of products

Products with certain labels orquality features

Freshly prepared food at the pointof sale

65

31

18

The price of products

Low priced own-store brands

Coupons or store discounts

Choice%

Quality/freshness%Price%



46

29

14

Proximity of a store

Short queues

Wide brand network

Comfort%

35

15

4

Competence/quality of staff

Ambience inside the store

Meeting other people

Shopping experience%

The shown data are only a small excerpt of all available data. You can analyse the preferences and demands of your target group and find the most effective messages to use when advertising to them using YouGov Profiles.

For information click:

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Largest choice possible of food

and personal goods

Largest choice of other products

Smallest choice of the most

important products

Products with certain labels or

quality features

Freshly prepared food at the point

of sale





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Additionally, special demand for products in grocery retail is something you can now focus on in the course of digitalisation

Food characteristics looked for % Find your own niche:

In times of digital transformation a deeper understanding of your

target group via YouGov Profiles gives you the opportunity to occupy an

attractive niche.43

39

24

23

18

18

Sugar levels

Fat content

Origin

Ethically farmed

Locally sourced

Fair Trade/Ethical

0

15

30

45

60Sugar levels

Fat content

Origin

Ethically farmed

Locally sourced

Fair Trade / Ethical

Waitrose

Aldi



See the demands of customers of certain retailers:

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As YouGov Profiles data shows, customer demands and needs are diverse. Digitalisation offers new possibilities to fulfil them –for example, by providing a more convenient shopping experience and

targeted and demand-oriented offers.

Differentiation is the only way

Two customer groups will be crucial in times of digital change: price driven customers and convenience seekers.

Taking this into account, differentiation and focus based on detailed knowledge of the consumer and specific target groups will be the key to success.

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Price driven customers are a group of pragmatic shoppers who make up a huge share of all customers

39% are price driven customers

Customers who are focused on every aspect of the price dimension, and who do not value

choice, comfort, or experience as much.

They show how pricing strategies work cross-channel: right now Discounters are very attractive for this group, but since online retail

is very good when it comes to low prices, their focus will switch:

35% say they will probably use discount stores more often in the

future.



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What price driven customers like:

They are more likely (20%) to be

middle aged (35-44 years old) and

female (56%).

Nearly four in 10 (38%) spend between £50 and £100 on food and household goods per week.

Take these brands into consideration more often:

:

They are Less likely (13%) have

an income above £60,000 per year and are more likely to be

married (44%).

They say that they enjoy watching TV with their

family (72%) more frequently.


Base: GB adults 18+ that belong to the “price driven customers” group 19

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And how they shop:

Almost half(46%) use discount stores today

more often than two years ago, while only

10% are using them less often.

They are more likely than the general population to buy milk, cheese and dairy-products

(83%), bread (81%) and

cosmetics (43%) on a weekly

basis.

When it comes to online shopping they are more likely to use:

They put great value on the

largest choice of products (37%)

and low priced own store brands

(49%).

For them there is not much difference between leading brands and

supermarket own brands (69% vs 59%).

and less likely to use:

74% say they have a favorite

brand, but if another brand is on sale they will buy that instead.

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Base: GB adults 18+ that belong to the “price driven customers” group

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Meeting the needs of price driven customers offers great potential for online retailers & discounters as well as challenges & opportunities for the traditional grocery retail market

Online will grow as well. As soon as online retailers offer the right discounts or bulk buying, this group will shift

towards this sales channel. They will be especially likely to buy non-perishable goods which can be bought in bulk and

therefore profit from coupons and other discounting.

The use of discounters will grow rapidly within this target group, since discounters target the price aspect the most.

This group will be enthusiastic about the new retailers coming over from mainland Europe with their focus on low

prices which means price perception will be strongly influenced and lowered.

They will need to focus on the price sensitivity of this group and offer them good value for money or low priced own

store brands. Even the competence of the staff could be key to retaining them for the long term. But in general,

traditional retailers will need to focus and open up other target groups or differentiate their offers.

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Base: GB adults 18+ that belong to the “price driven customers” group

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They don’t necessarily look for the best price, but if a retailer offers

them a more convenient shopping experience they will prefer this

brand.

Convenience can also translate to an online experience and these

consumers use online retailers more frequently.

To offer this group a convenient shopping experience, retailers have

to know as much as they can about their needs.

30% are convenience seekers

For them convenience is the most decisive factor when shopping or has became more

important in recent time.

The second group is crucial when finding out where digitalisation will lead



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What convenience seekers look like:

They are more likely to be female as

well (57%), but they are more likely

to be under 35 years of age (35%).

They consider brands like:

And they are more likely to treat themselves to food

that isn’t good for them (73%).

Regarding their income they are

close to the British average: a third

of them as an yearly income

between £25,000 and £49,999.

They are more likely to be on Facebook (76%) and

a reader of the Guardian (17%).

You can analyse the key psychological traits of your target audience and find the most effective messages to use when advertising to them using YouGov Profiles.

For Information click:

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Base: GB adults 18+ that belong to the “convenience seekers” group





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And how they shop:

They often do not know what they

will be buying prior to going

shopping (43%) and are more likely

to spend more than they intended to

(41%).

When it comes to online shopping,

they are more likely to use shops with

a lower price (46%) and put more

focus on free delivery (26%).

They are more likely to go in general to chemists

(90%) and organic supermarkets (31%).

They are more likely to make

frequent smaller shops on a weekly

basis (78%).

Four in ten use discount stores today more

often than two years ago, whilst nearly one in

five (18%) are using them less often.

51% would prefer online shops, were they can get the

best deals.

33% say that they buy at online shops

they also use in real world.

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Currently they don’t differ from the norm: Tesco, Sainsbury’s and Asda are their preferred online retailer.

Since they are looking for the best deals and convenience, this doesn’t have to be carved in stone.

Offering a good online and offline experience will be key to success. There are still hurdles that stand in

the way of meeting their need for convenience, but if, for example, same day delivery becomes more

common, the online business is likely to grow.

Discounters will also play a greater role in the future, since the convenience seekers are willing to use

them more often. This offers opportunities but also challenges for discounters, since they need to adjust

their online offer to be competitive and offer them a more holistic shopping experience.

This group is pretty demanding overall, putting much attention on other factors, as well as offering them

a good and convenient shopping experience: The proximity to the shop to their home and workplace,

offering their preferred payment methods and short queues are important for them. Meeting these needs

can be an important factor

for traditional retail.

Convenience seekers so far are linked to traditional supermarkets – but won‘t hesitate to change their preferences

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There is a big opportunity to grow online grocery shopping by increasing online frequency

1 Source https://www.statista.com/statistics/282070/distribution-of-the-grocery-market-in-the-united-kingdom-uk-by-retailers,

2 Source: YouGov Profiles

Base: Nationally Representative GB adults 18+

Almost every second customer uses online retail, but it it makes up only

6% of the whole sales of the grocery market in the United Kingdom1.

The development gets stuck:

Only 15% of customers use online grocery a few times a month or

more often2. Customers hesitate to spend their money frequently online.

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Retailers have to understand how this obstacle can be

overcome and how to increase their digital business.

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You also have to find out how customers satisfy their needs and which requirements are crucial for your online and offline-business


Base: GB adults 18+ that use online supermarkets/ online only supermarkets

People with current online

shopping experience…People without current online

shopping experience…

…are more likely to

make smaller shops

during a week (87%)

…tend to make

impulsive purchases

(41%)

…buy durable goods

on a more short-term

base

30% agree that online

shopping is cheaper than

in-store shopping (29%do not agree)


have a lower income

of up to £25,000

(35%)

…are less likely to

spend more than they

intended (32%)


stick to brands they

like (25%)

27 Base: GB adults 18+ that do not use online supermarkets/ online only supermarkets

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And which obstacles are holding people back in using online grocery

Top-10 obstacles: agree

44

40

35

31

26

24

23

17

17

13

71

51

38

57

42

25

34

14

33

19

Online shopping is worse because I cannot see or touch/check the products before buying them

I enjoy going to a supermarket store to shop

Additional shipping costs are too high

I do not trust the quality/ freshness of the products bought online (i.e. fresh vegetables,bread, fruit)

I don’t like my shopping behaviour being monitored online

I find minimum order portions are too large for me

If I only shopped online, I would miss the social contact of shopping “offline” in stores

My favoured store/ brand does not have an online shop

The negative environmental impact of shopping online bothers me (e.g. additionaltransportation of products, package waste, etc.)

In general, the delivery times on offer are inconvenient

Online Customers Offline Customers

In general, people with experience in online grocery shopping are less concerned across all measures. However, a significant proportion are highlighting

that there are obstacles which explains why online grocery hasn't had its breakthrough yet. Shipping costs and minimum portions are particular issues for

retailers to work on.

Online shopping is worse because I cannot see or touch/

check the products before buying them

I do not trust the quality/ freshness of the products bought online (i.e. fresh

vegetables, bread, fruit)

If I only shopped online, I would miss the social contact of shopping “offline” in

stores

The negative environmental impact of shopping online bothers me (e.g. additional

transportation of products, package waste, etc.)

28Source: YouGov Profiles

Base: GB adults 18+ that already did use online supermarkets/ online only supermarkets Base: GB adults 18+ that already did not use online supermarkets/ online only supermarkets

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If online grocery retailers overcome those obstacles they will grow rapidly, current customers are satisfied and will spread the word leading to an upward trend in online grocery retail

92%…of current online grocery shoppers

have positive experiences with online

shopping.

Due to word of mouth, your business

will benefit from these positive experiences.

48%…of users of online grocers say that

people ask him/her for advice before

buying things.

If they are satisfied, they will certainly talk with their relatives,

colleagues and friends about their experience and drive this

development.

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Base: GB adults 18+ that already use online supermarkets/ online only supermarkets

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Digitalisation will bring new opportunities and challenges:Disruption is further caused by new players...

can imagine ordering directly from the producer without

being dependent on the retailer.33%

Grocery retail is threatened by verticalisation: the online market will enable a direct connection between customers and producers.



This is especially attractive to consider for example for brands, where the share of

customers who want to buy directly is above the Nationally representative average:

42% 42% 39%

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Disruption is further caused by new technologies

Bild AI, Computergesteuert, irgendwas

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Automated reordering and artificial intelligence:

Consumables can be ordered with a single click

It may become the norm that fridges or pantries may order automatically

Shopping lists might be created by online stores based on former purchases and personal preferences

Only 15% say they would like to have products

that they buy on a very regular basis ordered

automatically as soon as they have used them up,

indicating that this hasn‘t reached the

consciousness of British consumers yet.



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In this fundamentally changing market, a strong brand becomes more important

New online grocery retailers will have the chance to

establish a brand that customers are attracted to. An

established presence could become crucial in these

changing times. If your brand stands for a certain

product or a shopping experience then it will gain an

important advantage.

Want to learn more? Click:

YouGov BrandIndex can show you what people think

about your brand:

Online shoppers are more likely to be customers of…

whereas non online are more likely to be a

customer of…

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Base: GB adults 18+ that already did use online supermarkets/ online only supermarkets

Base: GB adults 18+ that already did not use online supermarkets/ online only supermarkets

https://yougov.co.uk/find-solutions/brandindex/




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Recommendations

The market is changing: every retailer must embrace these changes, otherwise they will lose out.

You must therefore know your target group in detail: how they shop and which aspects of the shopping experience are crucial for them.

Think about customer needs and how you can fulfill them. Offer them the shopping experience they want.

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Overcome the most important obstacles to increase your online business and make gains from the new opportunities that digitalisation has to offer.

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About YouGov

YouGov is an international data and analytics group. Our core offering of consumer data is derived from our highly participative panel of 5 million people worldwide. For each panelist we have tens of thousands of connected data points so can answer the vast majority of research questions by interrogating existing data. Where we don’t have the answers already, we can perform quick turn-around re-contact surveys for client specific research.

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How YouGov can help you

Through the continued expansion of our data suite, we are developing a complementary portfolio of proprietary decision-making tools and resources which can support media agencies and brands owners through all stages of the marketing workflow. For example, our clients can:

• Identify target segments through Profiles.

• Track brand performance over time with BrandIndex.

• Explore trends and marketing challenges through Reports.

• Do a deep dive through Omnibus or Custom Research to understand why consumer sentiments and indicators are changing.

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Overview

This report has been created using in-depth data and analytics collated using

YouGov Profiles, YouGov BrandIndex and additional research using the YouGov re-

contact service. To create hypotheses to test with the large YouGov datasets and

validate findings, YouGov interviewed a total of 2,177 GB adults aged 18+

between 25th September - 27th September 2017.

YouGov Profiles is the YouGov connected data vault which holds 190,000 variables

collected from the most active 250,000 panellists in the UK. YouGov have the same

connected dataset in the US for over 200,000 panellists with 200,000 variables,

and also in Germany with 100,000 data points for over 55,000 panellists.

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Let us show you the power of our connected data and solutions.

For a free, no obligation, demonstration please contact:

David Ellis

+44 20 7012 6216

Email: [email protected]

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