Photo: Aldi
Should Aldi’s growing store count and digital progress keep rivals up at night?
Aldi has been growing its store count, supply chain infrastructure and digital capability in recent years and continues on that path. The limited assortment discount grocer with an own brands emphasis announced this week that it plans to open another 100 stores in 2021 with particular focus on the states of Arizona, California and Florida along with the Northeast region. The chain with its small box format expects to be the third largest grocery operator by store count by the end of the year.
Aldi also announced that it will roll out curbside pickup at 500 more stores by the end of the year, bringing its total to more than 1,200 locations. The chain will also continue to offer grocery delivery via Instacart in almost all of its 2,000+ stores across 37, soon to be 38, states. The retailer plans to move into Louisiana for the first time this year.
Aldi broke ground on its 26th regional headquarters and distribution center in Loxley, AL, as it continues to make a push throughout the Gulf Coast states. The 564,000-square-foot facility, its sixth distribution center in the region, will supply up to 100 stores in Alabama, Southern Georgia, Mississippi, the Florida Panhandle and Louisiana.
“Our commitment to our shoppers, new and existing, is the same — we will do everything in our power to offer the lowest possible prices every day — and we look forward to supporting more communities across the country with amazing Aldi products at a value that can’t be matched,” said Jason Hart, CEO, Aldi U.S., in a statement.
While price has always been central to its brand image, Aldi has remained equally committed to product quality in its own brand range, all of which come with a no questions asked satisfaction guarantee. The grocer has expanded its selection of organics and made fresh foods a central focus on its store presentation. Aldi has remodeled and opened new stores with modern designs, wider aisles, open ceilings, natural lighting and digital signage to promote its house brands.
The grocery has also tinkered with store size, building its new stores typically about 20 percent larger than in the past. A new location in Philadelphia last year is 25,000 square feet with a produce section about 40 percent larger than in a typical 16,000-square-foot Aldi.
Discussion Questions
DISCUSSION QUESTIONS: Are you surprised at Aldi’s apparent success at using online ordering and curbside pickup and delivery to grow its business? Do you see Aldi becoming a more troublesome competitor to large big box grocers than in the past?
Poll
BrainTrust
Jeff Weidauer
President, SSR Retail LLC
Matthew Pavich
Sr. Director Retail Innovation at Revionics, an Aptos Company
The answer to this is yes and no.
Aldi has found success in the U.S. and it is certainly taking some customers and spend from other grocery chains. Much of this comes down to price, but our data shows more and more shoppers are coming to appreciate Aldi’s quality and its selection of products. Moreover, Aldi’s newer stores are nice: and certainly a cut above the environment presented by some of the major grocery chains. All of this adds up to great value.
All that said, there are some shoppers who dislike Aldi’s smaller format and its relatively limited range. These numbers are still way higher in the U.S. than they are in other markets around the world. So there is still room for other supermarkets.
The indirect impact of Aldi, and the expansion of the dollar stores, is downward pressure on prices. I expect this to be an ongoing issue once we emerge from the pandemic.
Aldi has been impressive with its execution. The expansion in footprint, product assortment, store sizes, branding, and customer conveniences has been controlled and calibrated. Anecdotally, I have noticed more Aldi stores opening in upmarket locations, compared to three to five years ago. It is gratifying to see a retailer getting it and growing.
I’m not sure how much success they are having using online ordering and curbside pickup TO GROW THEIR BUSINESS, George. The article doesn’t say that’s the cause of growth – more likely it’s tied to more stores and keeping their prices low. They have an image problem here in Georgia that Lidl has managed to avoid. Improving their image could be very troublesome for their competition.
Actually, yes. Just prior to their arrival, several European chains tried and failed in the U.S. as they couldn’t hit on the right formula of customer wants. However coming in initially with the value play got them a nice base of customers and has allowed them to experiment with more up-market items. Last year was a boon for grocery so it makes sense that they are able to expand and by offering more services like curbside and delivery, they absolutely can eat into the share of other chains.
There is a saying that you plant seeds in winter and reap the rewards in spring. We are certainly in a retail winter and Aldi will reap the rewards as we move into a more normal post-pandemic life.
Aldi has been very successful across the world. Their success has come from knowing a particular segment of customer and providing that customer with their needs. They are not trying to be a traditional grocer. They don’t even expect to get the traditional grocery customer. They are very smart.
In understanding their customer and understanding their customers’ wants, it is no surprise that they are expanding online and via curbside. I predict as we get back to post-pandemic normal and the various activities of each of our days again take up our finite time that online ordering and curbside pick-up will be even more valuable.
Aldi is extremely efficient and organized. They have more than 10,000 stores in 20 countries, so it is not surprising they are expanding in U.S. too. Part of Aldi’s success is in integrating technology solutions into their stores. With so many locations worldwide, they can easily test different solutions and then quickly roll out the ones that fit their brand the best. By expanding so quickly, they can also take advantage of economies of scale and enjoy bulk discounts. They are a formidable competitor to keep an eye on.
What Aldi’s rivals should be worried about is the company’s singular focus on serving the customer. Store expansion, digital additions, and a strong private label are just tactics that demonstrate Aldi’s commitment to providing something unique.
Am I surprised that a company that is hyper-focused on their value proposition and efficient operations is doing very well? Not even a little bit. Will they become a problem for Big Box grocers? I would answer with a firm “sort of.” Aldi’s limited assortments will keep them from putting their bigger competitors out of business. However they are going to take marketshare in a lot of categories.
They emphasize healthy foods, non-GMO, organics, artificial ingredient-free products and offer them at really shockingly low prices. This is going to earn them share from high end and budget grocers alike. Their ability to penetrate a market quickly with lots of stores helps as well.
On the other hand, during the pandemic we’ve seen trip consolidation, and Aldi probably doesn’t do as well in that environment. I’m willing to pay a bit more at a bigger store if it means I can get more of my list completed.
It’s a small negative. Aldi is carving out a niche in grocery from big box, dollar stores and convenience stores alike by being really, really good at what they do.
Aldi’s success does not surprise me. The hard discounter efficiently adapts to evolving consumer tastes – whether it’s omnichannel service or private labels. This balance of methodical processes and customer-centricity make Aldi a grocery threat.
Yes, big box grocers need to stay on top of Aldi’s competitive omnichannel moves. As value shopping soars, big box stores, grocery and dollar chains are battling over slim margins and Aldi has an efficiency edge.
It is a bit surprising for a discount grocer to be growing with online ordering and curbside pickup. However these are becoming table stakes in the grocery industry, and Aldi has stepped up to have these offerings.
Aldi will continue to grow with its smaller format (although expanding some as noted in the article) and will continue to put pressure on big box grocers in terms of convenience and price. My daughter, with two school age kids, now only shops at Costco and Aldi. Between the two, she can find almost everything she wants to buy and loves the prices.
I’m not surprised. For as long as I can remember “experts” have been telling me Aldi would never succeed in America. And for all those years Aldi has continued to grow. There’s a saying that the devil’s greatest trick is convincing you he doesn’t exist. Sounds a lot like the Aldi strategy. I see absolutely no reason to believe that Aldi will not be an effective competitor for Big Box grocery. They know their customer. They evolve their offering. And they make great, if quiet, use of technology. Oh, and I’m sure they are happy to be underestimated by the pundits and the competition.
No surprises here. Aldi is smartly engaging customers without sacrificing product quality and offering products at a value price. They’ve succeeded with this model with low costs from a limited assortment without sacrificing product or convenience and being able to offer value pricing. The growth strategy for them is automatically easier as they need to source less products, find less square footage for new stores and find store locations in places where competitors cannot. The ability to service BOPIS and delivery is that much simpler with a smaller assortment. Add to that the customer focus, and continued expansion, and there will be competition for grocery and big boxes soon enough.
Not a surprise at all under the current circumstances. Stores are going to have to become multi-purpose over the coming years — this is fundamental as they become hubs for delivering harmonized retail. What is difficult is the multi-skilling of staff as well as the coordination of the different systems needed to provide the harmonized experience at an acceptable level of efficiency and cost.
The limited SKU and smaller store format is designed perfectly for online ordering and pick-up type orders. Customers selecting to shop at Aldi already know they are going to have limited SKUs so there will not be too many surprises about product selection (the here today gone tomorrow type items may pose some challenges in that regard).
I do think many of Aldi’s changes in the US have been driven by the arrival of Lidl. From a customer perspective, Lidl is a much better store with more to offer, a nicer atmosphere, and what seems to be even better pricing. From a profit perspective, not sure how what Lidl is doing is going … sometimes when something is too good to be true, it is.
The article is so lacking in numbers, I’d be hesitant to call it “apparent success”; more like “must-have’s” (though for a store that was until recently “cash only,” the pace of adoption might be a surprise).
Aldi is still small enough, and the grocery sector so vast — with lots of fumbling by once powerful operators — that they should be able to enjoy rapid growth for quite a while … until they’re a major player too. Then it gets hard.
I paid with a debit card at an Aldi over 10 years ago so they have not been “cash only” for quite a while. I think it was around 2016 when they started to accept credit cards.
We do still have some franchise C&S supplied Food 4 Less Stores in CA, most of WinCo (except in Tulsa), and Woodman’s (I think some may accept Discover?) that are accepting cash/debit only and no credit cards at this time where we sit in 2021.
I think the cash only policies are more about card processing fees than lack of innovation, at this point. In the late ’80s and early ’90s, it was innovative for grocers to accept credit or debit cards.
That was the finance guy part of me talking: from the expense point of view, debit=cash, since the processing fees are so low.
But does the customer view it that way? I’m thinking they think “I wanna pay this way and I couldn’t,” and if “this” = CC, they’re not happy that a DBC is offered.
Aldi is doing all of the right things to continue its growth in the US. Aldi has always offered a unique value proposition for a specific segment of US grocery and done a fantastic job at meeting the needs of those shoppers. It has also shown a willingness to go beyond and expand from its model to attract new customers. Very few people would bet against Aldi growing share in the years to come — and that share needs to come from somewhere.