The new report reveals the impact of Covid-19 on the overall market over the next three years, with a breakdown of expected implications and performance on individual channels.
The pandemic has accelerated the shift to online, a channel IGD expects to mostly retain the loyalty of new shoppers gained during the pandemic. Discount will, however, become the fastest-growing channel in 2021 and 2022, as shoppers looking to economise due to rising unemployment.
Online market share will increase from 6.2% in 2019 to 8.9% in 2022, following dramatic increases in shopper numbers and bigger order sizes. The value of the online channel will overtake that of hypermarkets in this year, while online will take £1 in every £11 spent on grocery in 2022.
Simon Wainwright, director of global insight at IGD, said: “We forecast e-commerce will gain market share faster than previously predicted, following the dramatic influx of new shoppers and bigger order sizes in 2020 as a result of Covid-19.
“While we expect growth to pause in 2021, it will later resume, with continuing expansion from Amazon and the launch of online operations by M&S through Ocado supplementing activity by the Big Four.
The convenience market share will increase from 21.4% in 2019 to 22% in 2022, with the channel benefiting significantly from meeting local shoppers’ needs during lockdown.
Wainwright added: “Having benefited significantly from meeting local needs during lockdown, growth for convenience stores will slow in 2021 and 2022.
“There is a key opportunity for stores that develop their role as destinations for local community needs going forward, but the slow recovery of trading in city centres and transient locations is likely to affect overall channel performance.”
The discount market share will increase from 12.8% in 2019 to 14.6% in 2022, the fastest-growing channel over the next two years, with the rapid expansion of Aldi and Lidl expected to continue.
Wainwright said: “Though eclipsed by the surge in online sales in 2020, discount will be the fastest growing channel in 2021 and 2022 as unemployment climbs and shoppers across the income spectrum look to economise.
“Store network expansion will enable this growth, with smaller store formats enabling Aldi and Lidl to boost their reach into urban areas and some variety discounters scaling up their grocery operations.”
Among large stores, the hypermarket market share will decrease from 8.4% in 2019 to 7.6% in 2022, while the supermarket market share will decrease from 46.1% in 2019 to 42.3% in 2022.
Wainwright concludes: “Strong growth at the start of the pandemic – driven by shoppers stocking up and preferring spacious stores – has receded.
“We expect hypermarkets to revert to sales declines as more shoppers migrate to other channels. After a boost to sales in 2020 from Covid-19, supermarket growth will turn negative by 2022. The channel will lose ground, particularly to discount and online, though it will defend its share better than hypermarkets.
“Retaining the loyalty of shoppers who switched to them at the start of the pandemic will be the priority for operators of large stores. Making stores easier to shop while also differentiating through their range and emphasising value will be vital as stores pivot towards more functional retailing.”