Aldi results could end top four domination, says Warwick Business School expert

THE record results posted by discount supermarket chain Aldi this week could be the start of a slow demise for the big four grocery retailers, an industry expert is suggesting.

Warwick Business School professor of marketing Lloyd Harris, who researches the retail sector, said: “If the market trends continue the big four food retailers are going to find themselves squeezed.

“At the top end of the market firms like Waitrose and Marks & Spencer are nibbling away at their market share of the still affluent middle-classes. While at the other end of the market competition is getting harder and cleverer.

“The discounters and no-frills retailers are still there while the astute, value-oriented retailers are eyeing the market share of Tesco with envy and, for the first time, with expectation.”

Professor Harris suggests it is no great surprise to see that Aldi has posted record profits this year.

“Their record profits reflect the on-going drive towards value in retailing,” he said.

“If we look at food retailing in the 1990s and the first part of the 2000s, the focus was on generating customer satisfaction and the ‘big four’ trying to out-compete each other for market share. However, if we can categorise the last six or seven years in retailing as anything, it is the era of value.
 
“At the top end of the market even the middle-class bastion Waitrose has introduced a value range in the form of ‘Essentials’. But the biggest inroads into the market have been from those retailers like Lidl and Aldi who have targeted consumers anxious to save money and achieve the elusive ‘value for money’.
 
“While the big four have all too often continued to dismiss the actions of such discounters – frequently using the labels ‘discounters’ or ‘no frill retailers’ as a means of suggesting lower quality – firms such as Aldi and Lidl have slowly and ever so quietly rewritten the rulebook of food retailing competition.

“Whereas in the past discounters just focused on being the cheapest, these new kids on the block have concentrated on creating value without compromise.

“That is, creating value for consumers without compromising – too much – on customer satisfaction and service quality.

“You can’t describe them any more as no-frills retailers – they may not have all the frills but most importantly they’ve got the frill that the customers want and at a price customers love.”