Convenience growth set to slow as online booms

The expansion of the convenience channel is set to slow slightly over the next five years, as online grocery sales continues to grow and large scale supermarkets evolve and ‘stabilise”, a new report has claimed.

A new five-year forecast from IGD Retail Analysis has highlighted the changes it expects to happen in the “unforgiving” retail market by 2021.

IGD Senior Retail Analyst Nick Gladding said the overall grocery market was set to grow nearly 10% in the next five years to £196.9bn, with hypermarkets and supermarkets stabilising as they evolved to better reflect the changing needs of shoppers. Although an initial decline was likely, Gladding said this would pick up from 2019 on the back of “mission-based” improvements to large store layouts, the increased use of concessions as well as simpler pricing strategies.

“The development of click and collect and advances in smartphone store navigation technology will help larger stores compete better,” it said. “And retailers communicating the advantages of grocery click and collect will make this a much more popular way to shop online.”

Grocery shopping online is set to grow to boom, with IGD predicting growth of 68% across the grocery category.

The discounters are also expected to see continued growth, albeit at a slightly slower rate, with the IGD forecasting them to be worth £24.9bn by 2021, a rise of nearly 40%. Similarly there is likely to be a slowdown in the expansion of the convenience market – the third fastest growing sector, with growth of 11.7% between 2016 and 2021.

IGD’s chief executive Joanne Denney-Finch said the “extremely” competitive market had been dampened by unprecedented food and drink deflation, but that the outlook was positive, particularly for shoppers.

“We believe there will be a modest recovery across food and grocery over the next five years, as inflation picks up and shoppers start to benefit from the investments that retailers are making in their stores and ranges,” she said.

Retailers who maintained several format could also benefit, she pointed out, by capitalizing on overlapping shopping trips to boost customer loyalty.

“For example, an online grocery shopper who has opted to use the click and collect service at a larger supermarket might also pop into the store while there, to make use of the many services or concessions on offer inside. It’s all about giving shoppers more reasons to visit a store.”