The rise of discounters
Discounters continue to drive growth in the market. Dollarama has reported double-digit sales growth throughout the past couple of years, and now has almost 1,000 locations.
Food discounters are likewise expanding. Notably, Kantar Retail projects No Frills will continue to growth at more than 5% compound annual growth rate through 2019. The banner already has greater past three month shopper penetration than Sobeys, according to 2014 TNS Canada shopper data.
Metro has also recognized discounters’ traction, recently converting a handful of underperforming conventional grocery stores into its discount banner, Food Basics.
This is likely only the beginning.
Loblaw cites its small-format discounter “Box” concept among one of its most important pilots, alongside the fresh food test at Shoppers and click and collect. Sobeys has yet to expand FreshCo outside of Ontario; after its Safeway integration is finished, watch for this to rise in priority.
As these value-focused, limited assortment stores drive growth in an otherwise modest landscape, pressure to effectively serve them mounts. To get perspective on how vendor partners should consider their alignment with these boxes, I interviewed Mike Paglia, Kantar Retail’s director on the discount channel.
Paglia explained the fundamentally different dynamics that a limited shelf brings. To summarize the conversation, he outlined these top three considerations for suppliers building position with discounters:
Top items matter more: With less space in the shelf set, the hurdle rates are naturally much higher. This means core, everyday items take priority, requiring suppliers to place calculated bets on a handful of their top performers. Conversely, new items are less important in this environment.
It also means that secondary and tertiary brands need to be more creative to assert their place. A focus on alignment with the stores’ trip type, such by offering targeted pack sizes, is one of the ways he recommended to approach this.
Private label pressure rises: As retailers balance profitability in these small formats, private label takes a greater share of the shelf. Asserting your brands’ appeal to shoppers and your items’ differentiated role on the shelf only becomes more important in this environment.
Focus on function: The trips, particularly to discount grocers, tend to be very functional. Instead of focus on engagement, emphasize the “recognition factor” within shopper marketing and packaging. Use of simple, iconic brand imagery helps facilitate the navigation. Also highlight the utility of the item as a core component of the value statement.
Paglia also recommends looking abroad to discounters like Aldi, Dollar General, and Lidl to benchmark best in class approaches. Each of these stores has a consistent and clear brand, with shoppers walking into their boxes knowing exactly what to expect. To chat further about positioning with discounters, email us at: Michael.Paglia@KantarRetail.com , or Robin.Sherk@KantarRetail.com