The lockdown boom in grocery shopping is seeing a “significant dip” as shoppers look to save money and return to pubs and restaurants.
According to IGD, the sector’s 8.5 per cent growth over 2020 will slow to 1.7 per cent this year and 0.9 per cent in 2022.
However, the next five years promise a “modest recovery” of 8.1 per cent overall.
“The significant dip we’re forecasting in the short term is to be expected; many households will be under increased pressures, making shoppers more value conscious,” IGD insight director Simon Wainwright said.
READ MORE: UK ‘quick commerce’ market worth £1.4bn
“The reopening of the hospitality sector, despite being from a very low base, will also divert some spend away from retail in the short term.”
He noted the grocery sector would remain larger than before the Covid-19 pandemic given the “elevated levels of home-working” and “fewer out-of-home eateries operating”.
Discount grocers are expected to be the fastest-growing grocery channel to 2026, adding around £6.6 billion in value.
However, they are predicted to gradually lose momentum and see their growth outstripped by online shopping after 2024.
Internet sales will be largely driven by quick commerce – groceries delivered in under an hour – which could reach around £3.3 billion.
“Quick commerce is an exciting, fast-paced channel which presents a huge opportunity,” IGD retail analyst Rachel Sibson said.
“Our annual market estimate […] shows that 13 per cent of UK shoppers already use quick commerce, but there is a further 22 per cent of shoppers interested, who are still to play for.”
Hypermarkets are forecast to lose £400 million while supermarkets will show marginal growth, both at the expense of convenience stores.
IGD believes these smaller shops will grow by 12.5 per cent by 2026 as many customers continue to work from home.
“Shoppers will need to justify the time and travel to large stores as other, more convenient options become increasingly available to them,” IGD retail analyst Nick Gladding said.
The news will be a surprise to some commentators, who believed smaller stores would be swallowed up by quick commerce.
In April, Credit Suisse analysts argued that Big 4 convenience stores face an existential threat from startups like Weezy.