By Mike Ljubicic
In the tumultuous landscape of economic downturns, one sector has consistently demonstrated remarkable resilience and adaptability: discount retailers.
This channel has continued to gain share over the latest 12 weeks and now represents 46.7 per cent of national GDM (Grocery, Drug, and Mass Merchandise) sales, up 50 basis points (bps) compared to the latest 52-week share of 46.2 per cent. One key driver is the dollar impact from the top categories. Across the top 10 GDM categories (sales volume), we see the impact of dollar growth in discount in the last 12 weeks and the last 52-week periods. In all 10 categories, the tonnage volume in conventional has declined compared to the previous year, ranging between -1.8 to -7.6 per cent, while discount tonnage is up between +1/3 to +6.4 per cent depending on the category.
Another driver of growth is the presence and penetration of control label. Overall, control label represents 18.6 per cent of total GDM sales for the latest 52 weeks and over-indexes in discount at 21.7 per cent during the same period, compared to 16.8 per cent in conventional banners. Over the latest 12 weeks, control label is up 20bps in discount to 21.9 per cent, while conventional dipped 10bps to 16.7 per cent. Consumers are searching for value, and the presence of control labels in discount is gaining a share of shopper baskets.
When we look at online and offline sales, is there a difference in ranking or performance? Interestingly, the top 10 categories for e-commerce dollar sales in discount rank closer to total GDM. Regardless of how discount shoppers are purchasing (online or offline), they are making similar choices in terms of category priority.
We will likely see the strength of discount continue in the back half of 2023 and into 2024 as consumers search for value and make destination, promotional and basket choices to manage their spending. With inflation down to 7.1 per cent in the latest 12 weeks in GDM, discount is still indexing higher at 8.5 per cent during the same period. It will be important to monitor both metrics over the coming quarters.
Innovation in discount
Innovation is another hallmark of discount retailers during recessions. They don’t merely rely on their established model; they reimagine it. Store layouts are revamped for efficiency; loyalty programs are fine-tuned to enhance customer retention; and private label products are introduced to maintain competitive pricing. These innovative steps sustain their growth and challenge the status quo of retail operations.
With heightened awareness of price increases, Canadian consumers have adjusted their shopping behaviours to accommodate their budgets. The pace of dollar growth is projected to decelerate, and slight relief will not offset the decline in consumption. As the market grapples with novel challenges, growth opportunities demand a strategic focus on gaining market share within specific categories. Identifying the driving forces and impediments to business success, optimizing trade expenditures, and collaborating effectively with retail partners are crucial steps for navigating the evolving landscape.
Having a sound discount strategy is important to win, but more importantly, knowing your shopper (i.e., where, what, and why they buy) online and offline (total omni view) cannot be ignored.
Mike Ljubicic is managing director for Canada, NIQ | nielseniq.com