Increasing pressure on prices in the food and other industries has helped boost sales of own label products and support the rise in popularity of discount chains, according to one Spanish industry association.
The findings were among many presented to delegates at the annual convention of AECOC (Asociación Española de Codificación Comercial), a non-profit organisation which works to promote relationships between suppliers and retailers, held in Barcelona last week.
According to AECOC, price will continue to play an important role in the retail sector in the future. The organisation predicts that average household expenditure will continue to fall as the traditional large family unit disappears, at the same time leading to increasing competition between retailers, all vying for a larger share of a smaller pie.
A study presented at the meeting and compiled by professor José Luis Nueno of the IESE Business School at the University of Navarra, showed that own labels currently account for 27 per cent of all supermarket and hypermarket sales in Spain, and that in 130 different product categories, retailers' own brands already account for more than 25 per cent of total turnover.
This popularity is due to one thing, Professor Nueno suggests - price. The retailers have been highly successful in sourcing their food and non-food products from all over Europe, searching further and further afield to find the lowest prices, he said. This is clear from the figures: in 1999, the price differential between own labels and branded goods was 38 per cent; in the second quarter of 2003, it was 55.8 per cent.
This, in turn, explains the success of the discount store format in Spain, where companies such as Carrefour's Dia unit have been highly lucrative - so much so that the company is rolling out the same format in many other markets across the world.
Professor Nueno's report shows that own label products account for up to 60 per cent of all sales at discount stores, and that this has helped them increase their presence fivefold in the Spanish retail market over the last decade, in particular at the expense of the hypermarket format.
Discount stores lifted their market share to 17.6 per cent of all food sales over the last year, the study shows, up slightly from 17.4 per cent, and similar increases were registered for non-food products as well, such as perfume or pharmaceuticals. At the same time, hypermarkets saw their market share fall from 24.8 per cent to 24 per cent in the food sector.
AECOC said that 23 per cent of Spanish consumers said that price was the most important factor for them when shopping, while 77.5 per cent of them would shop in a particular store to take advantage of price cuts there. In a similar vein, 72 per cent said they regularly used money-off coupons, while 57.4 per cent said they would switch from own label to branded goods when the latter were on offer.
The changes in consumer spending are related primarily to demographics, the study suggested. The number of single person households in Spain is now 1.6 million, and these people have less money to spend in general on consumer goods as a result of a higher fixed expenditure such as mortgages and a greater desire to spend their money on leisure activities.