Aldi: The Discount Success Story

By Moira McCormick on October 17, 2017

Aldi

It's the supermarket success story of the year – sales at German discounter Aldi have risen above £8bn in the past year, which is up by around 13% on last year's figures.  It's definitely not the same joyful tale for Tesco, Sainsbury's, Morrisons et al who have seen much smaller growth for 2016.  Asda, which has always prided itself on being the “cheapest” of the big supermarket chains saw a growth of only 1% last year.

Aldi currently have 700 stores in the UK but the chain's UK Managing Director Matthew Barnes is ambitious to have 1000 stores open for business by 2020.  It's onwards and upwards for the family-owned store.

Retail expert George Wallace, at MHE Retail, said: “They have a very simple business model – a limited assortment of products in smaller neighbourhood stores. 

Their value message is key right now for customers across the spectrum.  And there is virtue in that simplicity.”

Tesco and Morrisons are fighting back with tightened prices on key products and new product lines but it does not seem to be sufficient to stop the rot.

 

The Ultimate Guide to Discounting

 

Why has Aldi been so phenomenally successful, leaving Tesco, Sainsbury's and Morrisons struggling in their wake? 

Everyone knows that they are  a “no frills” store but the main reasons for their continuing success (apart, of course, from their claim that they are up to 30% cheaper than their rivals) are:

  • New store openings
  • Re-fits of older stores
  • Their shoppers are spending more
  • Limited (about 2,500) product variants which cater for the majority of customers
  • Smaller stores (1,200 square metres) are cheaper to run
  • Shorter, more frequent visits by customers

Aldi's traditional shoppers, those Mrs May might refer to as the “just about managing” are attracted to their stores because the squeeze on their wage packets means they just cannot afford to buy elsewhere.

However, it's not just the “working” man and woman who shop at their local Aldi  - the discounter has begun to attract more middle-class shoppers, lured in by a good range of superior wines and other food products. 

It was once thought they would not have been seen dead shopping along the Aldi aisles but they are no longer embarrassed to be seen there picking up a bargain for tonight's supper.

An independent study last month by The Grocer indicated that Aldi was 15% cheaper than Asda and 28% cheaper than Waitrose. 

Things are certainly changing in the supermarket sector.  Matthew Barnes has said recently “there is a realignment going on and customers are benefiting.  I think we've been a breath of fresh air.”

 

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