Hard discount inexorably invades all areas of consumption: the supermarkets Aldi and Lidl, EasyJet and Ryanair in the airlines sector, La Halle!, H & M or Vet Affaires in textiles, the free telephony operator via Internet and Brico Depot for DIY etc. All have gained strong positions in their markets based on the same concept: a limited service at minimum expenses.
In exchange, the consumer enjoys discounts while the distributor gets more profits. In the food sector, the introduction of hard discount was nothing short of spectacular. In the past two years, the strength of this phenomenon has gathered momentous intensity. In December 2004, during the days of the IFM, the annual convention of industry and commerce, this subject was foremost on everyone's minds. According to AC Nielsen, the milestone of 3,300 hard discount stores has long been surpassed. Over twelve months, they have attracted 880,000 new homes and pocketed over 1.8 billion euros in revenues.
According to the distribution pundits, this trend is expected to gather even more momentum in the years to come. Hard discount represents a new attitude towards consumption, another way of life that attracts all social classes. National brands can no longer afford to ignore the magnitude of this new phenomenon and all are ultimately threatened if they do not adapt to these new consumer behaviors.
The purpose of this paper is to consider the strategies that national brands may adopt to stem the spread of discount stores. How should these brands respond? To answer this question,the author first tried to get familiar with the phenomenon by relying on: desk research, interviews with experts in the distribution process, visits to hard discount stores with "non-customers" for understanding the mechanism behind the lure of this concept.
The scope of the was limited to the four main brands in France, Lidl, Ed, Leader Price and Aldi. This was to identify the reasons for the success of the hard discount stores' circuit and evaluate its impact on national brands. This understanding of the phenomenon of hard discount helped to formulate a few hypothetical answers.
Long considered the "supermarket of the poor", the term hard discount has become a new phenomena in the day to day consumption of the new century. The concept, initially invented by Aldi and Lidl in Germany was ruined by the war, but now continues to sweep over Europe at a steady rate (over 400 store openings in 2005).
In France, the first hard discount stores emerged in the late 80s in the east with the arrival of two German brands as precursors. In less than fifteen years, Aldi and Lidl have been able to impose long-term presence in France, from a simple and effective: small retail space that facilitated the opening, a reduced range between 600 and 3000 references against 16 000 in supermarkets, low prices, little or no national brands but with the products under private labels or brands, and without a store environment, reduced to its simplest form so that staff costs do not exceed 6-7% of sales against 11% for a hypermarket.
Under one term, the hard discount covers very different realities.Differentiation of European discount food are based mainly on the size of the sales area, width and depth of assortment, the possible presence of national brands and the difference in prices compared to supermarkets.
Tags: Hard discount meaning and concept, Aldi and Lidl, success of hard discount stores.
[...] Wrongly or rightly, brands and stores that sell them were suspected to enjoy the change of currency to revise their prices upwards. The hard discount has apparently been wiser and would in some cases lower its prices. In general, we find that the hard discounters have penetrated most countries with high purchasing power, or where distribution is modern and supermarkets have a dominant position, where the brands are strong and the strategies of retailers are highly service-oriented toawrds consumers. In these countries, the higher competitive advantages of hard discount allowed them to gain market share against the large hypermarkets. [...]
[...] The roads of the reconquest of the hard discount can be only those of quality. This is all the more true for the brand leaders, who cannot succeed in increasing their market share by lowering prices. Their mission is to permanently remain the standard of the quality, so that the consumer knows that if he goes away from it if he buys cheaper, thus helping widen the market and not leaving the MDD for future reference. Thus, Ariel maintains its leadership on the market of the washing powders by a continuous improvement of its formula. [...]
[...] The cashier is not pleasant but is as scarce as everywhere. Shelooks pressed but it is sure that her seivices are included in the prices displayed. At the cashdesk, they charge the plastic bags. I find that rather funny. This is good for the environment. I would doubtless return if I am satisfied by the products which I bought. However it will be only for repair because for me it is impossible to make it the destination for all my shopping. [...]
[...] The sachets of coffee (for coffeepots of Senseo de Philips) are also a blatant example of successful innovation: in a globally declining coffee market, this segment is exploding. We can also move to conquering new consumers, as Nestlé tried to do with its instant coffee, Nes Fusion, intended for those who do not like coffee Get ready to like what you have never liked"). Certain manufacturers also answer to ethical inspirations which are fashionable. This is the case of Malongo with its Max Havelaar certified coffee (fair trade) which met with a real success because it held of the coffee segment stemming from fair trade today. [...]
[...] The distributors became aware of these growing contestings. The interests of the industrialists and the distributors could thus converge on the implementation of these policies of Every Day Low Price. On the other hand, this decline of the prices of the products of big brands is a kind of shock treatment, which, while favoring the re-conquest of market shares, could indeed destabilize the opinion and go to the direction of the crisis of the legitimacy of the brands. On Friday, April 2nd Philip Morris announced a reduction of the price of Marlboro cigarettes by to compete with the smallest brands, which made it a strong competitor. [...]
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