Coronavirus (COVID-19): could hard discount make a comeback?

Maxime Delacour
Senior Retail Analyst
@RetailAnalysis

Date : 01 May 2020

As Russian discounter, Mere, plans to enter several European markets, we look at whether the hard discount model could make a comeback in a post-coronavirus world.

Russian hard discounter, Mere, sets to expand in Europe

Mere announced the opening of its third store in Germany, in the city of Halle. The discounter, part of Siberian group Torgservis, entered Germany in 2019 with the promise of being the cheapest in the market. The retailer follows a hard discount model, focusing on low prices and a limited assortment (mainly ambient food), which is sold in a simple and efficient environment.

In addition to Germany, Mere has plans to enter Lithuania and Poland in 2020. The group already has a presence in Belarus, since 2017, where it operates around 30 stores under its Svetofor banner. In 2019, Torgservis opened more than 500 stores in Russia. It is one of the fastest growing grocery retailers in Russia.

Source: Mere

Shoppers to revert to savvy behaviour

To try to think about how the retail industry could change as a result of the pandemic, we have looked at 10 hypotheses for the future.

One of these, “Revert to savvy shopping behaviour”, considers how shoppers are expected to adopt a more frugal approach to shopping. With the likelihood of a recession, value becomes more important as a driver of store choice and could encourage shoppers to choose discounters more.

Discounters likely to sustain investment in existing models

We expect leading discounters to continue to evolve their model by investing in ecommerce and digital solutions, as well as maintaining their store upgrades and network expansion in the long term. But in the short term, low prices, promotions and the awareness of private labels products will be a strategic priority to drive footfall.

Assortments will continue to evolve to cover more shopper needs and enable discounters to remain relevant and make sure their stores are (increasingly) a one stop shopping destination. Major discounters, such as Aldi and Lidl will reaffirm their position as a value and convenient shopping destination. More importantly they will focus on being the cheapest.

So, could hard discount make a comeback in Europe?

With most discounters moving to a more supermarket-like model, the question of a gap being created for a new hard discount player is worth considering. But a comeback of the hard discount model as it was 15 years ago with its limited assortment of private label products and a simple store design is unlikely. However, the very low-price promise from hard discount is expected to make a comeback, and this could be as early as 2020.  

Looking for more insight on discounters?

Subscribers interested in learning more about our view on the future of the discount channel in a post-coronavirus (COVID-19) environment can access two recently published reports:

Finally please have a look at our webcast where we discussed the future of the growth channels: online and discount, available here