The triumph of supermarkets: discounters are losing out

The triumph of supermarkets: discounters are losing out

Faced with powerful wage increases, consumers in germany are increasingly indulging in a little luxury when it comes to food and drink. Edeka, rewe and co in particular benefit from this.

According to a study by the gesellschaft fur konsumforschung (gfk), the sales of supermarket chains increased twice as much as those of discounters in 2018. "Consumers are willing to spend more money on high quality products. This is a trend that plays into the cards of the supermarkets," said gfk trading expert robert kecskes.

One of the big winners is the colonn-based retail giant rewe. The independent rewe merchants increased sales by a whopping 9.1 percent last year, making them one of the biggest growth drivers in the rewe group. Overall, the retail giant, which owns the supermarkets of the same name, the discount store penny, the retail chain billa, which is mainly active in eastern and central europe, and the tour operator DER-touristik, recorded a 4.7 percent increase in sales to 61.2 billion euros. The 2018 fiscal year was one of the best in the company’s history, said group chief executive lionel souque.

But rewe cannot rest on its laurels. There is currently brutal competition for customers in the german food trade. Aldi and lidl, for example, spend billions to make their stores more attractive. The discounters, once characterized by wooden pallets and neon tubes, have long since mutated into small supermarkets, both visually and in their range of products, in order to meet the growing demands of customers.

And just in the past few weeks, low-cost suppliers have caused a stir in the trade with drastic red-pencil campaigns for well-known brand-name products from coca-cola to kerrygold butter. The vehemently erupted price war is a burden, conceded souque. But he has no doubt that rewe will take up the challenge. "We’ll join the fight," he said. Rewe will not let aldi or lidl take the lead in branded goods prices.

The fact is: edeka and rewe have to do a lot to keep the cheap, overhyped home-shops at a distance. In more and more supermarkets, the meat counters are stocked with dry-aging cabinets, in which steaks are dry-aged for longer periods of time to improve the aroma. And in the vegetable departments, here and there, mini-grow houses are already taking root, where herbs and lettuce are growing in front of the customers, which can be freshly harvested and purchased. In addition, more and more restaurants are inviting customers to stay a while. "We can’t make a name for ourselves in a tough competitive environment with toilet paper and canned goods," explains souque.

Supermarkets are also trying to keep their distance from discounters on the shelves – for example, with high-quality private labels in the organic sector or regional products. But also by giving food start-ups like ankerkraut, little lunch or just spices space on the shelves and thus appealing to younger customers in particular. The strategy is obviously working. "At the moment, it seems, supermarkets are riding the coarser wave and are always one step ahead," is the verdict of gfk expert kecskes on the ongoing conflict between supermarkets and discounters.

In addition, the supermarket chains are in the process of further consolidating their already coarse store network. Rewe plans to invest more than one billion euros in germany this year alone to open or expand around 300 rewe and penny stores. And according to its own figures, the edeka group opens around 200 edeka stores and 120 netto stores nationwide every year.

And the close-knit network may even be the supermarket chains’ biggest secret to success: in a survey by UGW, a management consultancy specializing in retail issues, proximity to home proved to be the most important factor in customers’ choice of shopping location, more significant than product selection or even price.

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