Grocery retailers battle for UK market share

Aldi and Lidl, both based in Germany, have been steadily capturing market share in UK grocery retailing. Recent numbers show that Aldi has increased its market share from 3.9% at the start of 2014 to 7.3% at the start of 2018. Lidl, meanwhile, grew market share from 3.1% in early 2014 to 5.3% in early 2018.

From the perspective of traditional UK supermarkets like Tesco and Waitrose, the battle for market share has another challenge: pressure on profit margins. Aldi and Lidl are deep-discount grocers with no-frills stores. Not so for Tesco and Waitrose, which are full-service grocers. To be sure consumers can see the value in shopping at a full-service store, price promotions are often highlighted--and that cuts into margins.

In fact, price is a key element in consumers' perceptions of a store. Not long ago, Aldi overtook Waitrose as the favourite supermarket of UK consumers who were asked about satisfaction. Affordable prices would naturally be important to satisfaction.

Meanwhile, UK supermarkets will continue to face pressure from the deep discounters as Aldi and Lidl both plan to expand their store networks. At the same time, traditional supermarkets are slowing their store openings to maintain cost control. Will online grocery shopping be the competitive edge for traditional supermarkets? Possibly, as a growing number of UK shoppers try or continue buying food and household products without going into a store. Consumer behaviour is changing, and grocery retailers are learning to adapt so they can compete more effectively.