If you believe Clayton Christensen, author of The Innovator’s Dilemma, businesses are divided into the disruptors and the disrupted. In the British retail sector, it’s clear who takes what role. Aldi and Lidl are the dynamic young challengers, while Tesco, Asda, Sainsbury’s and Morrisons are the ageing giants making a futile stand against the tide of history.
Things might not be so simple, however. Yes, the discounters continue to gain market share at the expense of the so-called 'Big Four'. But for three of them, the decline has slowed notably.
Take a look at this rather thrilling chart from market research firm Kantar Worldpanel, which shows the change in market share from last year and the year before, during 12-week periods.
Tesco lost 0.5% of its share in the groceries market last year, but that’s far better than the 1.5% it lost the year before. Morrisons’ annual decline fell from 0.3% to 0.2%, while Sainsbury’s has maintained a modest 0.1% rate of loss.
It’s not as though sales have been falling that quickly either. Tesco’s receipts dropped 0.9% and Morrison’s by 1.1% - partly, Kantar says, because of a tough comparison with last year when there was a widespread voucher offer in place – while Sainsbury’s actually rose 0.1%.
Not exactly the empire strikes back (Aldi and Lidl grew sales at 18% and 12.8% respectively), but hardly a phantom menace either. The only big loser over the last 12 months by this reckoning has been Asda, which had survived the previous year unscathed only to lose 0.6% of its share this year, along with 2.5% of its sales.
Good news for big supermarkets then (unless you’re Asda), but it’s far too early to say with any conviction that the worst is really behind them.
The discounters are still expanding at a frantic pace. Aldi is ‘actively looking for sites’ in hundreds of locations across the country, which means more and more Big Four supermarkets will face the onslaught from competitors they simply can’t beat on price.
This isn’t to say Tesco and the others will disappear altogether. The Big Four command over 70% of the groceries market, so they'll be hard to shift. Besides, the main problem they face in this price war, overcapacity in large supermarkets, won’t last forever.
There may well be too many of these out of town behemoths, but there’s still serious demand for the range they offer – a demand Aldi and Lidl can’t possibly meet without abandoning their own low choice, low cost model.
Once enough of the unprofitable stores are sold, the rest should start performing better - but by that time we could well be talking about a Big Six.