The UK value, discount, variety stores and general merchandise retail channel is set to grow by 5% per year as more shoppers turn to value-focused retailers amid the cost-of-living crisis.
GlobalData reports that it will take the channel’s value to £59.4bn in 2027.
The data and analytics company said the recent collapse of Wilko should be seen as an outlier in the sector, while consumers will continue to shop ‘frequently and heavily’.
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With annual CPI inflation currently running at almost 8% and food price inflation at over 17%, shoppers are keen to make economies where they can, choosing discounters as their preferred shopping destination.
After food & grocery, the home and electricals sector is set to achieve the biggest cash gain of £1.2bn in sales over the next five years as shoppers turn to discounters to make affordable improvements to their living space, GlobalData predicts.
With discretionary purchases limited by the failure of incomes to keep pace with inflation and steep rises in mortgage repayments impacting homeowners, value retailers are well placed to capitalize on demand for competitively priced items for the home.
While the challenging outlook for consumers supports demand for discounters in the short term, longer-term prospects will depend on their underlying competitiveness, said GlobalData.
“The key here will be a relentless focus on operational efficiency to enable low prices and compelling promotions.”
GlobalData lead retail analyst Nick Gladding added: “Discount retailers are continuing to benefit from a clear thirst for value among consumers.
“Our research found that 48% of shoppers say they are trading down to cope with rising prices in essential sectors like food, groceries and toiletries, either by switching retailers or by turning to cheaper products at the same retailer.
“This proportion rises to 54% for women and 62% for 25-34 year olds. And with average earnings failing to keep pace with inflation, six out 10 shoppers expect their personal finances to worsen over the next six months, according to GlobalData’s latest UK retail trend tracker, ensuring demand for discounters will continue to be strong.”
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