The growth of discounters
The position of the “value” tier has been challenged by the success of the discounters, the growth of discounters Aldi and Lidl, targeting a mid-market standard branded product at a value price, and it is unlikely that the large supermarkets can counter this challenge by offering an inferior “value” product at the discounters price?
The discounters would appear to have moved the goalposts, by moving the bottom end of the market to the middle and challenged the position of the “value” range concept. Consumers see the discounters product as good quality and the equivalent of the standard ranges or brand leaders. The quality level of the “value” range had been surpassed and having a “value” range, highlighted the inferior quality and encouraged consumers to take their shopping to the discounter. Once at the discounter they discover that not only do they have a standard quality at a value price they are also developing cheaper premium market offerings.
Competing against discounters on quality and price through the standard range was an option. This would have caused some potential lowering of retailer profit margins but this is likely to have been preferable to allowing customers to develop loyalty to discounters on a more permanent basis. As things have turned out, aided by the recession and their willingness to invest, the discounters have become a fast moving force within the UK market and they are here to stay and grow.
Movement of the entry own label level is not new. Own label (as a value product) was first introduced as just an own label targeted against cheap third level branded products. It then developed into a more mid-range proposition replacing secondary branding with “premium” and a new “value” level being introduced around it.
Own label ranges are now extensive. Premium, Healthy, Organic, Standard, and Value are commonplace and Gluten free and Halal being amongst the latest niche ranges. For now, other than as a promotional concept, the “value” offering may be becoming outdated. If you raise it’s quality it is standard, you may as well put more effort and support behind the “standard” range to retain and win back shoppers.
Next time….The importance of Assurance!
Lets have a look at what’s in the marketplace.