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Hard economic times: a dream for discounters

Lien Lamey (Department of Business Studies, Lessius University College, Antwerp, Belgium and Catholic University Leuven, Leuven, Belgium)

European Journal of Marketing

ISSN: 0309-0566

Article publication date: 8 April 2014

3705

Abstract

Purpose

The aim of this paper is to study the relationship between the popularity of discount stores and the aggregate business cycle: Does discounters' market share go up during economic contractions and go down during economic expansions? Does the aggregate business cycle contribute to the long-term growth of discounters' success? Does the relationship between discounters and the economy differ across discounter types, namely hard versus soft discounters?

Design/methodology/approach

The study will consider the relationship between discounters' market share and the aggregate economy between 1991 and 2008 for 15 Western European countries. Moreover, aggregated data is provided for the Western European region as a whole, which distinguishes hard from soft discounters' share. Recent time-series techniques are used to disentangle the temporary versus permanent effects of economic contractions on discounters' share.

Findings

The aggregate business cycle induces temporary upward and downward swings in discounters' market share. Moreover, part of the increase in discounters' share during an economic contraction remains beyond the contraction, resulting in a permanent boost in discounters' popularity. Same substantive findings are found for each discount type (i.e. hard and soft).

Practical implications

In economic contraction years the growth rate of both hard and soft discounters accelerates, leaving permanent scars on the performance levels of traditional retailers. Discounters should try to further enhance their increased popularity when the economy turns sour. Traditional retailers, on the other hand, should try to prevent consumers from switching to discounters during contractions. Future research should explore the strategies that are called for in order to do this.

Originality/value

Discounters are the fastest growing grocery format in Europe. Traditional retailers can no longer afford to ignore them. As such, a better understanding of the drivers of this growth is called for. This study highlights one of the potential drivers, namely the economic climate, a driver that is widely discussed in the business press with substantial implications for grocery channel management.

Keywords

Acknowledgements

The author would like to thank Jean-Jacques Vandenheede (Nielsen Europe) for providing the data. The author gratefully acknowledges financial support from the Flemish Science Foundation (F.W.O.) under grant nr. G.0751.11.

Citation

Lamey, L. (2014), "Hard economic times: a dream for discounters", European Journal of Marketing, Vol. 48 No. 3/4, pp. 641-656. https://doi.org/10.1108/EJM-01-2011-0010

Publisher

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Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

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