Although the two overarching features of the FMCG landscape in recent years have remained consistent – stagnation and channel fragmentation – we’ve witnessed some shifts in how growth is distributed between channels and across regions.
Ecommerce continues its steady ascent. In 2017, the channel was responsible for 27% of growth. In 2019, this increased to 45%.
This acceleration has been made even more significant through the period of COVID-19. By the end of April, ecommerce had 12.4% of channel value share across China, France, Spain and the UK—having risen from 8.8% at the end of 2019. Much of this is driven by the success of pure players. Alibaba, for instance, rose from 5.7% share in China to 10.9%.
Supermarkets and convenience have also grown, while discount has stagnated. During periods of lockdown, proximity has become critical to success. The prominence of Tesco, Dia and Intermarche in their respective markets saw their share boom, while regional convenience banners in Spain also performed well.
Until now, the story of ecommerce has been one of regional disparities. The Asian market’s penetration far outstripped that of Western economies. And while differences in penetration remain, COVID-19 has caused a dramatic acceleration of ecommerce across markets. As the chart below shows, China has seen the most significant growth. In fact, it has only taken 4 months for Chinese ecommerce to generate the same share increase it has seen over the last two years.
Where are these new buyers coming from? In many markets, online options have recruited more older and rural shoppers than ever before. With older shoppers more likely to have been asked to take more stringent lockdown measures, and rural shoppers being further from the supermarkets that have remained open, ecommerce is the natural channel to turn to.
The sharp growth in penetration is notable. In the UK, over the first quarter, ecommerce penetration amongst the over 65s has risen from 13% to 20%. And amongst rural shoppers, it has risen from 23% to 30%. This boom is likely to continue, with the experience of ecommerce amongst new online buyers being largely positive. The projections certainly point to a promising future. Our initial 2020 forecast (made in December 2019) simulated a 6.8% share for global ecommerce. With the impact of COVID-19, we now forecast a new share around 1% higher—between 7.5% and 8%.
COVID-19 may have caused the discount channel to stagnate, but in 2019 we saw impressive expansion programmes that point to a sign of the channel’s future dominance. And with discounters likely to return to growth quickly following the end of the pandemic (forecast to reach 13.1% global value share by 2023), it is worth looking at where historic growth has been driven.
The UK market is a particularly salient example of the rise of discounters, where it is projected to grow from its current 12% value share to above 20% by 2025. Store openings by the likes of Aldi and Lidl will again propel some of this growth.
But the next stage of the discounters’ development will be marked by a move towards further diversification in the form of fresh and ambient groceries. In yet another sign of how discounters are firmly embedded within the mainstream population, the UK shopper profile of Aldi and Lidl now closely resembles that of Tesco.
Strong advances can also be seen in France, where Lidl has now achieved significant market penetration and reached 57% of the of the population in 2019. As in the UK, this has largely been driven by store openings – with 50 opened in 2019, and further 300 to be opened in coming years.
However, there is now a great opportunity for it to diversify its growth strategy. This will come through a focus on improving its loyalty rate through a variety of measures, such as activating its CRM programme and integrating e-commerce into its offering.
