British supermarkets are fighting for market share, by slashing prices, amid the growing popularity of discount food outlets, like Aldi and Lidl.
This has led to the so-called supermarket price war, which has now resulted in British shop prices falling at the steepest rate for at least eight years, according to the British Retail Consortium.
British shop prices fell by 2.1% in March, compared to the last period, which marked deflation for the 23rd consecutive month. Food prices fell again by 0.9% in March, from a 0.4% fall in February.
Overall, its Shop Price Index reported deflation of 1.7%.
This is also the first time the BRC index has fallen below 2% since its record began in December 2006.
“Food prices saw a further drop, largely as a result of promotions for fresh food, whilst non-food prices fell at a faster rate than last month, hitting a twenty-fourth consecutive month of deflation,” said BRC Director General, Helen Dickinson, in a statement.
“Clothing and electricals continue to outshine by offering consumers eye-catching bargains. In fact, there’s evidence of plenty of promotions and price-cuts in non-food items which should help drive up sales at a time when retailers are turning their attention to the Summer ranges.”
In the last two years, the UK supermarkets have slashed prices in order to get customers back on their side, amid German discount retailers Aldi and Lidl snapping up market share.
From 2012 to 2015, the Aldi and Lidl boosted their market share dramatically. Aldi went to 5%, from 2.6%; while Lidl’s share rose to 3.5% from 2.5%.
They have taken nearly 9% of the market in just two years.
In comparison, the largest three British supermarkets, Tesco, Asda and Sainsbury’s, are struggling to stop the decline in market share for themselves.
“Prices continue to fall across the retail industry and deflation is likely to be with us for the near future, which means shoppers are going to be able to stretch their budgets further when shopping in store or online,” said Mike Watkins, Head of Retailer and Business Insight, Nielsen in a statement.
“The implication for food retailers is that this may help sustain the slowly improving sales volumes we have seen in recent weeks, and also encourage consumers to spend some of their savings on affordable indulgences. For many high street fashion, home and outdoor retailers, lower prices are being backed up by attractive promotions which comes at good time as momentum builds in selling late Spring and early Summer ranges.”
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