Photo: Aldi
Aldi moves closer to becoming America’s third largest grocery retailer
Aldi’s inexorable push across the U.S. continues with news that the grocery chain is opening its first store in Louisiana this week.
The retailer, which expects to become the third largest grocer in the country by the end of next year, plans to open two more stores in Gulf Coast states next month and 20 additional locations before 2022 is over.
“There is nothing like watching shoppers discover Aldi for the first time,” Jason Hart, Aldi U.S. CEO, said in a statement. “There’s a moment of surprise when they realize just how much they can save by shopping with us. We can’t wait to share that experience with more customers as we add new stores across the Southeast.”
The chain will eventually supply its stores in the region from a new 564,000-square-foot distribution center scheduled to open later this year in Loxley, AL. The DC is expected to support as many as 100 Aldis located in Alabama, the Florida Panhandle, Southern Georgia, Louisiana and Mississippi. The company is looking to hire 200 associates for the warehouse and 300 to fill store roles.
The new Gulf Coast stores will be among the 150 new units that Aldi expects to open this year. The chain has opened 200 stores over the past two years. Its geographical focus for new stores in 2021 was concentrated in Arizona, California, Florida and in the Northeast.
Low prices have always been a key branding point among Aldi shoppers who appreciate the chain’s high quality private label lines that all come with a no questions asked satisfaction guarantee. The grocer has emphasized fresh foods and expanded its assortment of organics in recent years in step with changing consumer behavior.
Aldi has remodeled and opened new stores with modern designs, wider aisles, open ceilings, natural lighting and digital signage that promote its house brands. It has also opened some stores that are larger than its typical 16,000-square-foot layout.
The grocer said it would add curbside pickup at another 300 stores, bringing the total number of Aldi locations offering the service up to 1,500. Aldi currently operates around 2,100 stores in the U.S.
Discussion Questions
DISCUSSION QUESTIONS: Will inflationary pressures play to Aldi’s favor in picking up market share this year? How will the incursion of Aldi into new markets influence the competitive landscape?
Poll
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Gary Sankary
Retail Industry Strategy, Esri
Rachelle King
Retail Industry Thought Leader
A squeeze on household budgets is definitely helpful for Aldi. The exact same dynamic happened in the UK during past economic contractions when Aldi was more embryonic than it is now. The interesting thing is that once consumers switch to using Aldi, even if only for part of their shopping, they don’t tend to switch back even as their finances and the economy improves. That’s because, ultimately, Aldi is more than just about low prices.
Certainly, the onset of higher food prices and ongoing supply chain issues with the brands and large banners will benefit Aldi. They have effectively slid in just below Trader Joe’s and Sprouts (which now is more akin to Whole Foods vs. the budget banner they used to be) to create a highly passionate customer base who loves their deals. The unique thing about Aldi is that they appeal to a multitude of consumers – the budget-conscious, the hunter, the foodie. Expansion will certainly put a dent in their competition.
With the current high inflation rate, consumers will need to look for ways to save on their monthly spending. Once they discover Aldi, they will not only see that the level of goods is very competitive but also that the product quality of the private label assortment, one of the unique selling propositions of Aldi, is very high.
Consumers are already feeling the impact of increased grocery prices and this will play to Aldi’s advantage. As grocery budgets are squeezed by inflationary prices, more consumers will shift their shopping to discount grocery stores like Aldi.
Aldi is very well-positioned to take advantage of the current inflationary pressures. Given Aldi’s evolving focus on expanding market coverage, their quality of products, and the overall consumer experience, they are well-positioned to remain a formidable grocery player on the other side of the pandemic and current economic challenges. Aldi shoppers are increasingly becoming loyal to the retailer’s limited assortment offerings and their value proposition.
LImited assortment stores (with the exception of one chain) do not work in my area. Customers like choices in an expanded assortment at a great price, The advantage now in Aldi’s position is the migration to house/private label brands. The great majority of the store is just that.
Aldi is extremely well-positioned to grow marketshare in this inflationary period. Aldi has aggressively grown their store footprint over the last few years. This will make it easier for them to attract their competitor’s customers and, once they shop Aldi, I do think they’ll realize that Aldi’s prices, quality and small store convenience are very compelling. They are already disrupting grocery in many markets. The economic situation we find ourselves in today will only amplify their message and value proposition.
Seeing Aldi enter the U.S. appears to be healthy for competition. That said, I never recommend a race to the bottom in price as primary corporate strategy. Once at the bottom in price, things can only get worse for a retailer. I would feel more optimistic for Aldi were they good value-focused instead of cheap.
A race for market share with low pricing is always a killer to the bottom line.
Absolutely. We should also take care because a rapid pace of store openings can mask serous underlying losses. Makes me a touch skeptical that they tout both low prices and fast store opening.
The economic pressures are definitely favorable for Aldi’s expansion. Adapting to changing demands with more organics and curbside pickup also helps. The expansion of Aldi will definitely keep pressure on low prices.
Absolutely! The macroeconomic conditions are favorable for Aldi’s deep discount model without giving up on quality products. Operational execution has been a core strength of the company, and it will continue to serve it well. Aldi’s no-frills approach resonates well in the markets the company has chosen to enter.
The Albrecht family, who own Aldi and Trader Joe’s, has been historically secretive, coming to the U.S. in 1979 after years of success in Europe. The Aldi side has been best known as the “silent killer.” Aldi enters new markets with little fanfare and quickly develops a sizable consumer following.
I see Aldi as the supermarket equivalent to Dollar General – rapid expansion with offerings designed for their respective target markets. What began as a corner store in Germany is now poised to make a real difference in the U.S. The brothers should not be taken lightly by competitors.
Let’s hope Aldi is not making their expansion decisions because they see an opportunity to take advantage of current inflationary pressures. Aldi did OK over the last decade when that decade of inflation was the lowest in history.
Too often we look at the grocery industry as a monolith. It is far from that. The top grocery chains all have different reasons for being and different reasons why people shop there. That is the case with: 1. Walmart. 2. Kroger. 3. Costco.
Chasing the #3 spot for Aldi is a fools race. Winning the #3 spot because they are Aldi is an entirely different story.
From my first day as a trade journalist — sometime during the Jefferson Administration — I was told as an article of faith that Aldi would fail in America. Five years later I was told the same thing. Ten years later I was told the same thing. And — well, you get the idea. Early on I kept saying Aldi would win big, if for no other reason than because nobody took them seriously enough. And, no surprise, I still think too many in the industry badly underestimate Aldi in the same way “the pundits” contemptuously dismissed Walmart’s early ventures into food retailing. Pundits must not shop much. Aldi is going to pick up market share this year – inflation or no inflation. Obviously, as Aldi moves into new markets it’s going to take out marginal players. But Aldi’s genius is that it has never played the same game, or at least by the same rules, as Kroger, or Publix, or any other supermarket chain, so it’s hard for traditional players to compete with them.
Absolutely! “Aldi is going to pick up market share this year – inflation or no inflation.” Inflation (or lack thereof) has not been a factor in their success.
Will inflationary pressure play to Aldi’s favor? Yes. But while customers will come for the low prices, they’ll stay for the experience.
Unlike other discount and low price grocery retailers, Aldi continues to compete on a simple customer experience. Aldi combines its affordable prices with simple, consistent store layouts, clear language and messaging, and a stress-free customer experience. And since it mostly carries exclusive products, customers don’t have to choose between an overwhelming array of brands and prices.
There’s a reason why Aldi is consistently ranked as one of Siegel+Gale’s World’s Simplest Brands. And a simple experience is what’s going to strengthen Aldi’s role in the (ahem) market.
The followup to this, of course is “who will be hurt (by their growth)?” Winn-Dixie, it seems, has long been the designated victim in the Southeast, so we’ll have to see how this turns out for the various players.
Of course, inflationary pressures will work in Aldi’s favor this year. But I suspect that shoppers will also be pleasantly surprised at the quality of produce and private label assortments. This will translate into more trips to Aldi.
I will keep an eye on Aldi in the Spring when it opens a big store two miles from me in the Cleveland suburbs. It will compete with nearby Meijer, which opened last year, and a Giant Eagle, a major force in the Cleveland marketplace. It will be interesting to see the competition unfold.
The only question for Aldi is what took you so long? The South East is a prime market for their demographic. Consumer price sensitivity during this pandemic will only increase their appeal. The spot for third largest US grocer is theirs for the taking. US grocers in the South East would be wise to take note of this expansion.
Aldi will absolutely do well in this economic environment. During the Great Recession they did well and they have continued a strong focus on retaining customers and growth. Plus, our research shows stronger quality in produce and checkout speed is highly rated, and price, based on store brands, is also strong. Meat continues to be a weakness and, of course, variety is limited.
Undoubtedly the inflationary pressures on households will make them look at how they spend their money and saving $/£/€10 each week on groceries could be very welcome. Only this week in the UK, upscale grocer Waitrose, has been warned that with inflationary pressures (largely driven by household energy bills) are likely to see customers looking elsewhere if they do not perceive value. The same is true in any market but as the value of the money in your purse declines, it is even more relevant.
Aldi does things their own way and in an interesting manner. They have had success with little inflation. Inflation and the squeezing of many people’s and families’ budgets will only help drive customers to their stores–however, I do not feel Aldi necessarily needs this for their success! If we still had no inflation, I would expect them to do well in their new markets.
Aldi will likely benefit from the current economic conditions. Also, the customers that Aldi picks up will likely become loyal and dependable for them, as Aldi offers those customers dependable and good deals!
I think the relative pricing of Aldi will help them more to pick up market share. Aldi seems to have a good grip over customer behavior and needs. That’s why they have priced their products which are not exactly cheap but lower than their immediate competitors. This will trigger customers to compare, visit stores and have a meaningful interaction with the stores.
I believe Aldi’s expansion into new markets will result in healthy market competition. Aldi knows how to adapt the brand experience to make it relevant for its customers and execute crucial initiatives such as curbside pickup in the right manner. The success of Aldi could become a driving factor for other stores to update and provide better customer service.