Discounters growing at a “significantly faster rate” than supermarkets but Sainsbury’s c-store growth continues

Discounters’ growth rates are now far outstripping those of the supermarkets, according to research published this week.

A new report by the Local Data Company (LDC) has found that while the number of supermarkets grew by 33% in the last five years, the discounters have grown significantly faster at 52%.

The report looked at the growth of the supermarkets and discounters between 2010-2015 and revealed that in 2015, discount store growth was three times as fast as the big four supermarkets.

Key findings include:

  • Overall growth rate for supermarkets and discount stores across the towns was 45% (+2,057 stores)
  • Discounters opened 1,487 units at a growth rate of 52% in the five year period
  • Supermarkets added 570 units over the last five years at a growth rate of 33%
  • Asda has the most stores (23% of its portfolio) in the fastest growing towns in the last five years, with Tesco having the fewest (17%).
  • 22 towns saw a net decrease in discount stores in 2015, suggesting saturation has been reached

LDC director Matthew Hopkinson said: “This analysis of the rise and increasingly fall of the supermarkets and discounters over the last five years clearly illustrates the fierce competition and the resulting decline in sales that the big four supermarkets have experienced.

“Poundland’s acquisition of 99p Stores was the first sign of any consolidation within the discounter market which has shown explosive growth at 52% over the last five years.

“The result has been not only the closure of supermarkets but most recently some discounters have also closed some stores of which Poundstrecher is an example. Overall, the discounter march continues as seen by the second half of 2015 when 120 new discount shops opened whilst in the same period 12 supermarkets closed.”

Dr Clive Black, head of research for Shore Capital Markets added: “Limited assortment discounters are now opening new space at a much faster rate than supermarket groups, many of the latter engaging in recovery and focus strategies that require a cut in capital expenditure to protect their balance sheets.

“Against a backdrop of sustainably poor same store trade we note with interest that Asda has the most stores in its portfolio in Britain’s fastest growing towns on LDC’s measure, whilst Tesco has the fewest, perhaps reflecting the relative maturity, size and nature of each groups’ estates.

“We expect the trends outlined by LDC to persist for some time as the discounters press on and the larger supermarket groups continue to make more from their residual estates.”

In a related development, Sainsbury’s has posted a 0.8% fall in like-for-like sales in the 12 weeks to 4 June, in a deflationary environment described by the retailer as competitive and challenging

However, its convenience business saw growth of more than 6%, with seven Sainsbury’s Local convenience stores opening in the quarter.

Phil Dorrell, partner at Retail Remedy retail consultants commented: “This decline in like-for-like sales has come as Tesco is returning to growth. It is no coincidence and should not be glossed over.

“Sainsbury’s is not competing against the discounters directly; it can hold sales by providing the brands and goods to top-up the basket where Lidl and Aldi cannot compete.

“But it must stay alert to the competition in food and should not be overly dependent on non-food and convenience to support future growth. Differentiation and communication of its core offer is what we are keen to hear about.”

Latest figures from Kantar Worldpanel revealed that the big four supermarkets – Tesco, Sainsbury’s, Asda and Morrisons – all suffered sales losses in the 12 weeks to May 22, with Sainsbury’s seeing a decline of 1.2%.

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