Drivers of value retail growth

Long before the pandemic reshaped consumer priorities, discount retail was quietly gaining ground across Europe. In the five years up to 2019, value retail sales* rose by 28% - more than any other price position (See figure 5). This growth reflects a sustained structural shift, one that has since been amplified by macroeconomic instability.

Building on this foundation, discounters became clear beneficiaries of stagnant real wage growth and pandemic-era frugality, catalysing a broader flight to affordability. In response to pricing pressures and uncertainty, consumers curtailed discretionary spending, creating fertile ground for fast-growing value retailers such as Action, KiK, and Primark to flourish. These brands continue to outperform, capitalising on efficient operating models and value-led propositions to win both mindshare and market share.

Today’s shoppers are increasingly deliberate in their purchasing decisions, actively seeking value and weighing trade-offs with heightened scrutiny - especially among younger cohorts. McKinsey & Co. found that 80–95% of Gen Z and millennials across France, Germany, Italy, Spain, and the UK traded down last year, compared to 52–81% of older generations. Yet this behaviour does not signal a collapse in consumer spending. Rather, cross-category trade-downs are becoming more prevalent, with many consumers cutting back on essentials to preserve discretionary indulgences - a redefinition of value rather than a retreat from consumption. As a result, retail polarisation is intensifying; while mid-market operators fight to maintain relevance, both luxury and discount segments continue to thrive.

Removing the stigma

Once seen as a compromise, value retail has been rebranded as a conscious - even aspirational - choice. Brands like Aldi and Lidl have built strong value perceptions by offering consistently low prices without relying too heavily on loyalty schemes or aggressive promotions. Their lean operating models - compact stores and minimal staffing - drive cost efficiencies that support competitive pricing, while a strategic focus on private-label products keeps sourcing costs low and margins healthy.

Over time, consumers have embraced this model, drawn to its transparency and increasingly at ease with private-label goods. McKinsey’s 2025 survey found 81% of European shoppers view private-label quality as equal to or better than A-brands, and 84% plan to keep buying them even if their purchasing power improves. Across Europe, off-price shopping is no longer just accepted, it’s seen as savvy and intentional.

This dissipation of stigma is evident in the sales data: from 2019 to 2024, value retail sales grew by 36%, significantly outpacing the 21% growth in the mass market (see figure 5). CEE and Southern European markets have grown rapidly from a low base, while established strongholds like Germany and the UK continue to dominate in overall market share (see figure 6).

Aldi and Lidl

As Europe’s two largest value retailers bolster their expansion strategies, the polarisation of the retail landscape is set to deepen. Hard discounters, in particular, have proven sagacious in their expansion - often targeting underserved and inflation-sensitive areas to maximum effect. Their vertically integrated supply chains offer a distinct advantage, enabling rapid responses to pricing pressures and supply disruptions, and reinforcing their resilience in a volatile market.

Thanks to a strategic overhaul, Aldi has unlocked operational efficiencies and laid the groundwork for growth with investments in forecasting technology, warehousing, and IT infrastructure, streamlining an already lean model. Key targets include Poland, France, and Spain, with ambitions to surpass 6,000 stores in Europe by 2026. In Spain alone, Aldi has averaged 42 new store openings annually since 2022.

Meanwhile, Schwarz Group (Lidl and Kaufland), Europe’s largest retailer by revenue, continues to scale. Traditionally favouring freehold acquisitions, Lidl has shown greater flexibility in response to space constraints, embracing leasehold land arrangements to sustain growth. In August, the company committed to 35 new store developments across the UK and continental Europe, each structured as a leaseback upon completion.

Diversification and urban penetration

Value retail is developing well beyond just grocery, particularly in CEE and Southern European markets. Non-food discounters, with their wide-ranging product selections, are increasingly competing with mid-tier specialists and attracting a broader consumer base, resulting in a more nuanced and complementary discount market. Dutch-based Action stands out, generating €13.8 billion in sales in 2024, a 21.7% year-on-year increase. With over 3,000 stores across 13 countries and Romania next on the map, its treasure-hunt model of low-priced general merchandise continues to gain traction. Meanwhile, Poland’s Pepco is refocusing on its core clothing and home goods business following the symbolic £1 divestment of struggling Poundland. With 70% of store space dedicated to apparel, Pepco is now expanding southwest, targeting Italy and Portugal as its next growth frontier

This diversification is mirrored in the physical footprint of discounters, which are no longer confined to suburban and regional zones. As out-of-town availability tightens, off-price retailers are pushing into urban centres through format innovation and infill strategies. Smaller concepts like Aldi Local and Lidl Express are making inroads into high streets and shopping centres - territory once dominated by mid-market and premium players. In Spain, for example, low-cost operators’ share of shopping centre space has risen by an estimated 19% since 2015. The lines between retail formats are blurring, and discount retail is no exception.

The next phase: smart discounting

Top-performing retailers now operate beyond their low-cost roots, adopting sophisticated multi-format, multi-category models that flex according to geography, audience, and purpose. Lidl Plus, for example, offers personalised loyalty rewards, while Lidl France’s Beauty Box collaboration with L’Oréal signals a more aspirational positioning. Netto Denmark’s 3.0 concept is another example: modernised stores with improved layouts, larger fresh produce areas, and a more supermarket-like atmosphere. These innovations reflect a movement towards modern, more intelligent discounting - where experience, curation, and digital integration complement price. As such, discounters are highly equipped to enter new markets, attract broader audiences, and challenge traditional retail hierarchies in the years to come.

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