Variety stores continued to post healthy current value growth of 5% in 2016, vastly outperforming the wider mixed retailers channel, which experienced an increase of 1%. Warehouse clubs followed, with 2% current value growth. The growth of variety stores was fuelled by the increasing offer of grocery products at low prices in these outlets. One of the strengths of warehouse clubs and variety stores is that they sell groceries, which ensures that consumers return on a regular basis. The number of consumers looking for affordable products is continuing to grow, whilst the offer of a wider product variety is also fuelling the performance of these channels.
In terms of brands, Costco led mixed retailers in 2016 with a value share of 16%, very closely followed by Target, with 15%. Despite increasing competition from internet retailing, Costco continued to increase its number of outlets to 488 in 2016. This was driven by the large inventory available through both its stores and digital platform. Target continued its dominance as the top mass merchandiser, with a 59% share of sales in 2016. Wal-Mart Stores is present in warehouse clubs and mass merchandisers. Its Sam’s Club and Walmart outlets ranked second in these channels respectively in 2016.
Variety stores is set to post a value CAGR of 3% at constant 2016 prices and warehouse clubs a CAGR of 2% over the forecast period. These channels are likely to benefit the most from consumer trends. The rising inventories and competitive prices of warehouse clubs will continue to drive sales. Consumers are likely to choose to avoid making trips to different retailers; instead purchasing both grocery and non-grocery items in these outlets. Warehouse clubs offer credit to customers, which will also help to drive sales. On the other hand, variety stores is expected to continue to benefit from rising incomes amongst the consumer base.
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