As retailers face deflation and a sector that is changing remarkably fast, grocery sales continue to decrease.
The amount that British consumers are spending across the Big Four stores, Tesco, Asda, Sainsbury’s and Morrison’s, has fallen for the first time in at least 20 years, according to Kantar Worldpanel. Grocery market sales have fallen 0.2% over the three months ending November 9, Kantar found, the first decline since its records started in 1994.
Ascribing the decline to deflation, Fraser McKevvit, Head of Consumer and Retail Insight at Kantar Worldpanel said:
“Deflation is 0.4% and we’re forecasting that deflation will continue well into 2015. On that basis, it’s a reasonable assumption that it’s going to continue and that there’s not going to be any recovery in the overall market until the middle of next year at least.
He added that the future of the market depended on grocers’ pricing decisions:
“If the price war intensifies, that could take a lot more value out of the market, alternatively, if the big four grocers hit on a formula that attracts shoppers back to their shops with something that differentiates them from the discounters, then we might see growth return sooner.”
In a separate, critical report, investment bank Goldman Sachs said that Sainsbury’s, Morrisons and Tesco are “totally addicted to space”.
If these supermarket chains wish to return to profitable growth, Goldman advised on a reduction in selling space (by 20%), which could involve closing some stores altogether. The report said that Tesco, with the largest amount of store space and the biggest stores, would benefit the most from cutting back.
In contrast to the Big Four’s poor demand, discount retailer Aldi has seen sales jump by more than 25% from a year earlier - now with a record market share of 4.9%.
Lidl also performed well, with its market share hitting 3.5% following a 16.8% rise in sales.