While Western European store-based retailing was badly hit by Coronavirus (COVID-19) in 2020, grocery retailers, which remained open throughout lockdowns, experienced a spike in sales due to the pandemic. Supermarkets, in particular, benefited from a consumer preference for one-stop shopping, minimising time spent outside the home and the number of locations visited. However, after the boost to sales in 2020, grocery retailing will generally see stagnating sales over the forecast period.
Grocery retailing was posting very modest growth rates in the years immediately prior to 2020, with price competition hitting players’ margins and increasing levels of maturity being seen in many of the channels. Sales in two of the biggest markets – France and the UK – were actually stagnating in 2018 and 2019, with growth proving hard to come by. Hypermarkets were struggling in France, widely associated with wanton indulgent consumerism and seen as part of an identikit, cookie-cutter retail infrastructure. Furthermore, bulk shopping is less important for the increasing numbers of single-person and two-person households.
Unlike the rest of store-based retailing, grocery retailers benefited from the pandemic during 2020. Performances improved in all but forecourt retailers, which was hit by the restrictions placed on mobility and travel as well as people working from home. Otherwise, with consumers needing to prepare more meals at home during lockdowns, due to foodservice establishments being closed and work-from-home mandates, grocery retailing sales went up, particularly in supermarkets, convenience stores and discounters.
Following the unexpected strong growth in 2020, there will be a dip in sales in grocery retailing in 2021. This will then be followed by very modest annual growth rates in real value terms over the rest of the forecast period. Price competition will remain a factor in suppressing value growth, with discounters continuing to expand and supermarkets/hypermarkets looking to hit back via, among other things, lowering their prices. E-commerce and click-and-collect services will continue to grow in popularity, while sales of organic products should also be a key growth area for grocery retailers in 2020-2025.
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