Executive Summary

This report on discount retailing concerns discount grocery retailers and non-grocery retailers, and details the continued prosperity of factory outlet centres. In 1999, total sales for discount retailers in the UK were recorded at £1.24bn, a rise of 45.8% since 1995.

Since the first edition of this report was published in 1999, there has been an increase in the number of British consumers who visit factory outlet centres and patronise the rapidly-growing discount chains such as Matalan PLC, TK Maxx and TJ Hughes PLC. In part, this has been due to the fact that the major chains have expanded their branch networks significantly over the last 18 months (through acquiring newly-vacated larger town properties following the exit of C&A from the UK and the restructuring of chains such as Littlewoods). The number of factory outlet centres in the UK has increased to over 35 and most people can reach a factory outlet development within a 2-hour drive. Finally, the factory outlet centres have become more attractive to consumers, as the number of retailers establishing factory outlets has grown significantly and now includes major High Street brands such as Marks & Spencer and Body Shop.

In the grocery discount sector, the major discounters, including Lidl Ltd, Netto Foodstores Ltd and Aldi Stores Ltd, have largely peaked. Unlike on the Continent, where most of the discount food chains originate, the British consumer has largely moved on from shopping at various independent butchers, grocers and fishmongers and has become used to one-stop shopping. Additionally, competitor low-price chains such as Costco Wholesale UK Ltd and ASDA (and latterly Wal-Mart) have a wide product mixture, including low-end, mass-market and higher-end products.

The non-grocery discount sector has expanded extensively across the country with new branches, as well as moving into home shopping, catalogue shopping and electronic commerce (e-commerce). Following this period of rapid expansion, many discount retailers, such as Brown & Jackson PLC, are now targeting continental Europe for expansion.

This overseas expansion indicates that in some respects the UK market has become saturated. Demand for discount retailers has peaked and the non-grocery discount chains have now achieved nationwide coverage. Factory outlet centres are nearing saturation and therefore it is expected that future growth will depend on, on the one hand, the discount chains such as Matalan PLC reinforcing their image as national retail brands, and on the other hand, the factory outlets continuing to encourage consumers to visit them rather than traditional malls and out-of-town retail clusters.

In 2000, discount retail sales were expected to rise by 22.3%, to £1.52bn. Sales are forecast to rise to £3.92bn by 2004.

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