Are Aldi’s customers who you think they are?

Discussion
Photo: Aldi/Instagram
Sep 19, 2018
George Anderson

When news broke last year that Aldi was testing home delivery in several markets, many questioned whether the service was aligned with the hard discount grocery brand’s image and the customers who shop in its stores. Similar concerns were expressed more recently about Aldi’s test of curbside pickup in select cities. While some continue the debate, Aldi meanwhile has announced it is rolling out home delivery on a nationwide basis in partnership with Instacart.

The rollout will take the service to 75 major markets in 35 states, including Miami, Minneapolis, New York City, Raleigh, NC and San Diego. Aldi tested home delivery in Atlanta, Chicago, Dallas and Los Angeles before making the decision to expand.

“Aldi is a pioneer and a leader in creating a shopping experience that works with people’s busy lives,” said Jason Hart, CEO of Aldi U.S, in statement. “Our partnership with Instacart and the expansion of our e-commerce options are more ways we are meeting the growing needs of today’s shopper, who wants high-quality food at unbeatable prices.”

Instacart CEO Apoorva Mehta called the reaction of customers in the test markets “overwhelmingly positive” as he expressed confidence in the two companies to grow in the new markets where home delivery will be made available to Aldi’s customers. 

Those who want home delivery can place their orders online through the Aldi page on Instacart.com or by using the delivery service’s app. Those new to the service can receive $10 off their first three orders of $35, or more by using a promotional code.

Aldi, as widely reported, has been on a growth tear in recent years, investing more than $5.3 billion in remodels and new store openings. The chain has set a goal of becoming the third largest grocer by store count, from its current 1,800 locations to 2,500, by the end of 2022.

The grocer, which primarily sells private labels billed as meeting or exceeding national brand quality standards, announced last month that it was expanding its selection of fresh foods, organics and easy-to-prepare dishes by 40 percent. Aldi offers a guarantee that gives customers unhappy with a purchase both a replacement product along with a full refund.

DISCUSSION QUESTIONS: Are you surprised that demand for home delivery from Aldi in test markets was strong enough to warrant a nationwide rollout? Can Aldi offer services such as delivery and store pickup along with expanded selections of fresh food, organics, etc. and maintain its reputation for being a hard discount grocery operator?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Before we know it, having groceries delivered to your home will be no different than ordering beauty products, fashion products or other staple goods online."
"I am not at all surprised, as they say in Boston, “everyone loves a baahhgin.” Aldi’s product mix and price strategy is a perfect fit for Millennials with busy lifestyles."
"I don’t think home delivery is table stakes for every grocer — but it might be a boon for this one."

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13 Comments on "Are Aldi’s customers who you think they are?"


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Art Suriano
BrainTrust
Without seeing actual numbers, it’s hard to know how successful Aldi’s home delivery was in test markets. However the question is going to be, what do grocers see the long term for their business? The more they figure out ways of keeping the customer out of the store the more that’s going to change their business dramatically. Aldi stated they’re spending 5.3 billion dollars on store remodels and new stores, and they’re committed to opening 2,500 stores by 2022. So the question to ask is, why? If grocers master home delivery, which is doubtful because it is still not proven that the majority of customers want this, who will shop in the stores and what happens to Aldi’s growth plan? Watching grocers and retailers stepping all over themselves for the fastest delivery possible is sad because they are spending huge dollars chasing after something that may not prove to be that critical long term. What is worse is they are not investing money in the stores they have with staffing and training to attract customers… Read more »
Neil Saunders
BrainTrust

The downturn of 2008 changed a lot of things, among them attitudes about shopping. There is now very little stigma to shopping at value players and discounters, indeed, it is seen as savvy. That’s why Aldi’s customer base has, for a long time, consisted of a wide mix of demographics and income groups. Some of these groups like low prices but also value the convenience of home delivery; this service is aimed at them.

By offering discounts on the service Aldi will damage margins, but it will also help it to grow market share as it will likely increase the frequency of shop. That said, partnering with Instacart is a low-cost option for entering the delivery market, which allows Aldi to leave its simple no-frills business model intact.

Jeff Sward
BrainTrust

I think this proves retailers at every tier have to offer convenience and ease of shopping. Just like e-commerce retailers who offer seemingly unlimited returns. I don’t know how they do it, but so far so good (right … ?).

Cathy Hotka
BrainTrust

Despite the quality merchandise and low prices, shopping at Aldi can be a challenge. Customers who want to stock up have to buy by the case, or bring their own containers. The closest store may be 10 miles away. Home delivery would not only make shopping easier, but might encourage customers to purchase much more. As I said yesterday, I don’t think home delivery is table stakes for every grocer — but it might be a boon for this one.

Ricardo Belmar
BrainTrust
I am not surprised at all by this outcome. I believe all the surveys we see reporting consumer attitudes towards delivery are missing something when it comes to the grocery segment. I am sure there is a growing segment of shopper that does not want to take the time necessary for a grocery store visit. I for one do not look forward to most grocery store visits, no matter how nice the experience is created by the retailer, it’s just not something I look forward to and am eagerly awaiting the day Instacart comes to my neighborhood! I strongly suspect Aldi has witnessed this phenomenon and concluded it’s the right move. The fact that Aldi is implementing delivery doesn’t surprise me because this is yet another data point (along with what’s happening with department stores and off-price apparel stores) that shopper demographics are changing dramatically with the changing economy in recent years. Consumers at all income levels now want value in more categories than before, but they do not want to give up convenience. So… Read more »
Steve Montgomery
BrainTrust

The short answer is no. As the article’s headline implies Aldi’s customer base is far broader in terms of socio-demographics that some might expect. For the vast majority of the population the idea that someone must be have a lower income to seek value in the purchase has long passed. A prime example was an article in yesterday’s Chicago Tribune entitled “Ways the wealthy sit on their cash.” Number 5 was to use coupons.

Home delivery is no longer a new concept. This issues for grocery retailers are how to do it right and who pays for it — them or the consumer.

Byron Kerr
BrainTrust

Before we know it, having groceries delivered to your home will be no different than ordering beauty products, fashion products or other staple goods online. Aldi and other retailers realize this and have made efforts to bring it in-house (Target purchasing Shipt) or partnered with a company that has the infrastructure built already (Aldi with Instacart). Despite the cost increases, Aldi could go the way of other online grocers by selling ad space similar to how brands can buy store placements in brick-and-mortar. Walmart, CVS, etc. (through Triad Media) and many other retailers have implemented this on their online platforms as a way to generate incremental revenue, which helps offset the massive investments they are making in the logistics space.

This is a fast-growing transformation of the grocery logistics space and I believe Aldi is making the right push to build more brand loyalty through convenience. Name one consumer that ever said, “I want life to be less convenient.”

Georganne Bender
BrainTrust

People who love Aldi LOVE Aldi. It’s always a favorite in our consumer focus groups.

You know how people become loyal to one grocery store (and lose their minds when the store does a reset)? That’d be me. I am not an Aldi shopper but my husband is, and so are our Millennial children. My well-heeled friend, who has unlimited grocery choices where we live and could shop anywhere, prefers Aldi. So no, this doesn’t surprise me at all.

Rich Kizer
BrainTrust
I agree with Jason Hart when he said that Aldi must continue to find ways to meet the growing needs of today’s shoppers. There is a danger here: to sustain brand and market position today, businesses must focus on being just as good as the competition, at a minimum. They deliver? We’ll deliver! When a new idea hits the street, it is like a tent falling on all business, and everyone jumps in and does it. But it can’t stop there! Here is the real dilemma: There must be creative strategic thinking in every business, every day, that centers upon reinventing or creating unique customer experiences and actions that are not offered by competitors (yet). Yes, if these actions are successful they will be copied. But the tantamount truth in our business world today is: no one can sit still in our highly competitive markets and times. Today a business must focus on reinventing their business by at least 10 percent a year — not necessarily big things, but customer-centric actions that make them stand… Read more »
Shep Hyken
BrainTrust

I can’t forecast if delivery is a good move for Aldi, but I can tell you what customers want. They want convenience, and if grocery delivery is what they want, and they don’t get it from Aldi, they may try and find it elsewhere. (And it is available elsewhere.) So if Aldi’s customers are demanding delivery, then they have to deliver. The opposite is also true. Apparently, many feel the typical Aldi customer may not care about delivery. That’s why this came as a surprise. Aldi knows. They understand what they need to do for their customers and what they need to do to remain competitive.

Ken Morris
BrainTrust
Ken Morris
Retail industry thought leader
1 year 4 months ago
I am not at all surprised, as they say in Boston, “everyone loves a baahhgin.” Aldi’s product mix and price strategy is a perfect fit for Millennials with busy lifestyles. They make shopping simple and fast by offering only a limited number of options for each product category, which reduces they time to compare products. The products are selected based on quality and broad appeal and because they purchase massive quantities of limited products they drive down their costs from manufacturers, which lowers the prices for consumers. It is a great business model, especially for a category with traditionally low margins which they cleverly offset with their extensive private label assortment. Initially, Aldi was primarily a store for lower income demographics, but they have expanded their product offering to include more fresh foods, organics and easy-to-prepare dishes, which appeals to mid to higher income consumers. They still have the reputation of quick, easy and low priced shopping, which appeals to busy shoppers in all income ranges. These busy shoppers are the same people that value… Read more »
Ananda Chakravarty
BrainTrust

No surprise. For Aldi the partnership is key. The test is really testing Instacart’s ability to service Aldi customers, not whether customers will buy Aldi products for home delivery. Aldi has shifted the burden and cost (and potentially profits) of home delivery to their partner, expanding their brand’s convenience factor.

The second key part is the fact that most if not all Aldi products are private label — you can’t get them anywhere else. Home delivery becomes much more attractive to existing Aldi customers.

For Instacart, the issue of substitutions can be a concern with a much smaller assortment than most grocers — potential out-of-stocks — but this was probably already factored into their relationship. Aldi has strong loyalty, high quality offerings, and is known for their fresh product.

I won’t go so far as to say that this will be a home run hit for Aldi, but it will improve convenience for customers who already love the brand.

Harley Feldman
BrainTrust

I am a bit surprised at the positive response for grocery delivery from Aldi. Aldi has a changing product offering in fresh food and their customers go to the store looking for lower prices than the competitors. Its customers must want convenience and lower prices to pay for at home delivery.

Aldi can offer more fresh foods, etc., but it will need to work harder at providing them to stores as a regular selection so consumers can expect their favorite items to be in the stores when the consumer wants to buy them. Of course, it will need to continue to be a low cost grocery provider to maintain its history of being a discount grocer. Achieving both of these goals will be challenging.

wpDiscuz
Braintrust
"Before we know it, having groceries delivered to your home will be no different than ordering beauty products, fashion products or other staple goods online."
"I am not at all surprised, as they say in Boston, “everyone loves a baahhgin.” Aldi’s product mix and price strategy is a perfect fit for Millennials with busy lifestyles."
"I don’t think home delivery is table stakes for every grocer — but it might be a boon for this one."

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