For many in the UK, the Queen’s Jubilee and the summer of sport made 2012 an unforgettable year. For the majority of UK grocery retailers, this summer’s events did not provide the significant boost to sales that they had hoped. Retailers have had to compete harder than ever for growth this year, but with the challenges came opportunities and the industry continues to evolve at pace.

Shoppers have changed their behaviour as they have tightened their belts and savvy shopping has become chic. This is affecting different channels in different ways. Better off families are now looking to discounters to save on food bills and, according to our ShopperVista research, nearly a third (31%) of shoppers say they will be using discount supermarkets, such as Aldi and Lidl, more this year – this is up from 24% a year ago. While they remain a small part of the overall grocery market – representing just 4.5% – discounters have been broadening their appeal.

Our research also found that shoppers are favouring a ‘little and often’ approach, with 49% of them now doing their grocery shopping three or more times a week, compared to 39% in 2009 . This is one of the factors helping to boost the convenience sector. The sector is more competitive than ever and convenience retailers have been raising their game with stronger promotions, a greater choice of goods and better value for money. The sector’s development is bringing new standards to local retailing and has reinvigorated the traditional independent sector with the increasingly sophisticated response of the symbol groups. At IGD, we expect UK convenience stores sales to reach £44bn by 2017, a 29% increase from the current value of £34bn.

Retailers have also been developing their online services to become more convenient for shoppers ordering at home or on the go. Websites now have even better functionality and many retailers have launched smart phone and tablet shopping apps to give shoppers even more flexibility about when and where they shop. The biggest retailers have upped the ante this year, developing new platforms and building “dark stores”; even Morrisons, which has previously resisted entering the channel, has now launched some online services, including a personalised wine website.

The challenge for many large retailers now is creating a multi-channel experience which links together their online and smartphone services and their bricks and mortar stores. We expect online grocery shopping to continue to grow in popularity – 44% of shoppers surveyed in our research said they expect to use the internet to buy their groceries in the next five to ten years. In fact, IGD predicts that the online food and grocery market will almost double its current value of £5.6bn to be worth £11.1bn by 2017.

The economic conditions might still be tough, but developments in the food and grocery industry this year have once again proved that there are still plenty of growth opportunities. The consumer goods industry needs to remain agile and closely tuned in to shoppers and the world in which they live to ensure it adapts to the fast pace of change – that will be true for 2013, and indeed for many years to come.

Article by Patrick Mitchell-Fox, Senior Business Analyst.


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