Oliver Wyman Survey - The discount strikes back

Germany: Discounters and full-range retailers on par regarding fresh product ranges

For the full-range providers in the German food trade, harder times are ahead when competing with the discounters. The Germans continue to value the low prices and promotions of the discounters. But now the discounters are also putting billions of euros in investments in their branches and in the product ranges. With regard to fresh products, Lidl and Aldi are already reaching almost full-range supplier satisfaction levels with their customers. This is shown by a recent consumer survey by strategy consultant Oliver Wyman. The consultants assume that the discount stores will be able to increase their market share in Germany by two percentage points to around 44 percent by 2020. This corresponds to cumulative sales losses of more than 10 billion euros for the remaining retailers.

Whoever hears ‘discount’ thinks of low prices. And exactly these are the hallmarks of Aldi, Lidl, Netto and Penny. In a representative survey of 2,100 Germans, 71 percent said they had the best regular prices; only 29 percent thought full-range retailers had the edge. When asked about the most attractive promotions, the discounters are also ahead with 56 against 44 percent; the three most popular programs are from discounters. Another survey result underlines its original strength. Aldi, Lidl & Co. are the primary shopping center for 50 percent of German citizens.

Discounter and full-range retailer equal in fresh products
Nevertheless, the full-range companies have gained some market share in recent years. In a time of robust recovery, many customers were willing to spend more money on food. Supermarkets also benefited from this thanks to their traditional lead in the fresh produce range. But this is exactly where the discounters are doing well. After all, in the Oliver Wyman survey 55 percent of discounter customers agreed that the most important criterion for choosing their shopping location was the best quality fresh products. For supermarket customers, this share was only slightly higher at 61 percent. Lidl and Aldi already reach similar values as full-range suppliers when asked about the satisfaction of their customers regarding fresh products. For example, 47 percent of Lidl customers are convinced that they will find the best fresh produce there. Among the full-range retailers, this value varies between 46 and 74 percent, indicating the performance gap as well as most important battle ground.

Oliver Wyman partner Rainer Münch reminds people: "Only with excellent fresh services at competitive prices will supermarkets be able to compete with the discounters in the long term." The expert expects that the gains of the discounters will not come solely from losses of the large-scale retailers and department stores, which are already under pressure. Even supermarkets will not be able to escape the pressure. Münch: "The German full-range retailers should supplement their product ranges, otherwise their triumphant reign will end sooner rather than later." Currently, Oliver Wyman's advisers expect the discounter's market share to increase by two percentage points to 44 percent by 2020. If that is correct, the other providers will see around 10 billion euros in sales pass them by.

When dissatisfied with freshness every second customer
will change his place of purchase

This forecast takes into account the ongoing modernization of branches at large discounters as well as the announcement of investment programs to a previously unknown extent. The alleged cheap chains are renewing themselves completely - with new logos, new uniforms for their employees and wider ranges with more fresh produce. Here, they are encountering the Achilles heel of the full-range retailer. The latter’s need to undertake action is further underlined by the survey results. According to the numbers, only 41 percent of their customers agree with the statement that all supermarkets in Germany are offering high quality fresh fruit, vegetables, meat and fish. And every second customer stated that he would change his shopping location if he was no longer satisfied with the freshness of the products of his supermarket. Industry connoisseur Münch sums it up: "The sooner the full-range retailers arm themselves for the next attack of the discounters, the better."

Source: Oliver Wyman/ots

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