Mainstreamers won’t compete with value retailers on price, research reveals

Research from Gordons looks at current and future impact of value retailers upon the sector

There is a polarisation of opinions within the retail sector over how mainstream retailers will fight back against the growing threat of value retailers, according to independent research commissioned by Yorkshire law firm Gordons.

Whilst there is a common belief that value retail is here to stay, 85 per cent of mainstream retailers say they won’t compete on price, and will instead focus on product range and customer service to stave off competition from discounters, according to Gordons’ report, ‘The Future of Value Retail’.

However, their value counterparts do not believe range and service alone will be enough to fight back against value chains such as Aldi, Lidl and B&M. Almost half of value retailers believe their mainstream rivals will have to lower prices permanently or rely on promotions to maintain market share, the findings show.

The research was compiled from interviews with 50 senior executives in the retail industry. Most felt that a change in consumer mindset was an important contributing factor in the continuing growth of value and discount operators, as it has become increasingly more socially acceptable to shop at value retailers. The majority also said that value retailers must develop a digital strategy if they are to keep growing market share in the longer term.

The report was launched at a breakfast event and Q&A at Gordons’ Leeds office, chaired by Gordons retail partner Andy Brian with a panel of retail experts including Nick Glynne, managing director of Buy It Direct, Ian Schofield, head of own label at Iceland, and retail marketing strategist Jonathan Sands OBE, chairman of Elmwood Design.

Andy Brian said: “You can’t help but be impressed by the way in which discount and value retailers have grown their share of the retail market in recent years. They are currently the fastest growing and most disruptive force in retail. The rise of the German discounters in the grocery sector is well known, but discount and value retailers are having a much wider impact.

“With the positive shift in consumer perception comes the opportunity for further growth, but there are some difficult challenges ahead.

“Above all else, these findings show that retailers believe value retail is here to stay. Many believe that value retailers can continue their growth through increased store coverage and expansion into other product areas, but they will at some stage have to embrace the digital revolution in order to meet the consumers’ desire for range of choice and convenience of experience.

“Whatever happens next, one thing is for certain; the consumer will be the winner.”