February 14, 2007
Aldi: Small Stores and Big Growth
The stores are small, typically, not much bigger than a convenience store. The selection of foods and some non-foods is limited, mostly private label, but the prices are enough to make some shoppers ask, “Wal-Mart, who?”
Kristen Torres, 22, told the Hartford Courant that she and husband Vinny, 24, do most of their basic grocery shopping at the Aldi in Wallingford, Conn. The reason is simple, she said, “You pay half the price. I love the fact that milk is always $1.99 a gallon.”
Aldi is far from a household name in the U.S. The company has stores in 26 states and is just getting started in a few of those. Recently, it announced plans to build a 500,000 square-foot distribution center in South Windsor, Connecticut to supply 70 new stores planned for Connecticut, Rhode Island and Massachusetts.
Bruce Persohn, vice president of Aldi’s northeastern division, said it is looking to break ground on the warehouse this spring and complete it by the fall of 2008.
Neil Stern, a senior partner with McMillan/Doolittle, said, “They’re a very different retail company. They own all their own stores. They don’t take on any debt. Aldi builds stores only as fast as their profits allow – they don’t add any more stores than the cash allows.”
Discussion Questions: Will Aldi become popular with all types of consumers in the U.S. as it has in Germany? Do you see Aldi changing, in terms of products sold, merchandising, etc. as it gains more market penetration in the U.S.?
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The first Aldi I saw back in the 80s was a converted gas station with no pumps. Canned goods were stacked on pallets on concrete floors, there was no refrigeration at the time, and the products were mostly private label overruns or soon-to-be-out-of-code. I thought they’d never survive, but we had a recession, generics became popular in conventional supers, and there were no Wal-Marts like those today. Consumers shopped for “cheap” and Aldi gave it to them. With no advertising budget to speak of (they had no idea what they could offer from day to day), they had (and continue to have) infinitesimal overhead costs.
Does anyone else see Aldi as a progenitor to dollar-type stores? The same dollar-type stores that seem to have peaked as a category? Here’s a thought: As the value of the USD fluctuates downward against other currencies, and as China gets closer to allowing their currency to be valued against the world market, the costs of many of the non-food items in dollar-types will rise, making them more dependent on food sales. Then, they’ll become more competitive with Aldi for locations and sourcing overruns and out-of-codes.
Aldi is not going to reach the critical mass Wal-Mart has been able to achieve. However, Aldi will be very successful in carving a nice place in the US retail landscape because they can secure store sites quickly and the investment for each new store is far less than most other retailers. Aldi’s clout in the US will come from them being able to create a cult-like following of customers. You can almost view them as appealing to consumers who don’t have the means or access to a Costco or Sam’s but want to feel like they’re getting club store bargains without having to buy the extra-jumbo-super size.
I have never been a personal fan of Aldi due to there limited assortment and all most all of their offerings are private label. But recently while helping my daughter shop for food while she was balancing an anemic budget, I have a new appreciation for them. I already knew that Jewel and Dominick’s had very high prices, but I was surprised at how much better Aldi is than Wal-Mart. There still is the extremely limited assortment but their prices are very good. I always wondered about the demographics of a typical Aldi customer but my guess is that it is anyone that is truly interested in saving money on groceries, whether its based on necessity or desire. There are no frills of any kind. You have to buy a bag to put your groceries in and rent a cart to shop with. The purpose of the exercise is to sell food at the lowest possible everyday price and make money. Apparently Aldi has done a very good job of figuring that out.
Aldi has been slow to gain widespread acceptance in the US, however this will change.
Aldi’s discount format, its small size and potential for providing convenient shopping in dense urban settings is a major plus.
I am a believer in America’s growing desire for smaller and more convenient shopping venues that meet there specific needs (price, convenience, assortment) and Aldi is in a position to capitalize on this trend.
I believe we will see a growing redistribution of consumer spending to an increasingly diverse retail landscape. The days of category dominance may be waning. Taking share from these vaunted retailers will be those who meet the specific product and convenience needs for diverse segments in the marketplace.
Aldis, Tesco, Kwik Trip and other C-stores like them and many other retailers who have seen the rift developing in America’s retailing environment are in my opinion those who are most likely to succeed in exploiting this trend.
Aldi’s American formula seems to be working, so why change it? They don’t need to appeal to everyone, and they’ve kept their operation simple. They’re proof that it isn’t necessary to appeal to everyone to be successful. They’ve also proved that it pays to control expansion to what your infrastructure can reasonably support. Their willingness to own their locations will be a key determinant of their longevity.
Aldi is relatively new here in Atlanta and I can pretty safely say that it will not become popular with all types of consumers. It is a very working class and ethnic clientele (at least here)and when you see obvious middle class/upper class shoppers coming in for the first time, their dismay is obvious. Doesn’t mean that it doesn’t have a [good, strong] niche or that it can’t compete with the Wal-Mart Super Center about 100 yards up the street, but it is not going to attract/keep a wide demographic.
I’m a big Aldi fan and see unlimited growth opportunities. They are the cheapest grocer by far while offering very high quality, except perhaps in produce. Aldi loves to be near a Wal-Mart Supercenter and feeds off of their traffic. They are so unique that they really do not have any direct competition. Where ever there is a Wal-Mart Supercenter there is room for Aldi to compete.
Their operations ratios, such as their $600 plus per man/hour is about three times what Save-A-Lot achieves.
I’ve seen Aldi make some merchandising changes. They are offering more unique high quality products that are hard to find at other stores, except perhaps Trader Joe’s. I do see them finding ways to attract various other types of consumers. Upscale, middle class, lower class, Hispanic, etc. are all targeted.
Aldi is a very smart retailer. I say that with confidence because they left my favorite store alone when they bought it…Trader Joe’s. I would think they would have learned how to maintain customer loyalty by running this chain and any new concept would incorporate their learning. Who says that stores need to be huge to be successful? Why not smaller footprints that can fit just about anywhere, provide a reasonable range of products, at competitive prices, and be convenient to shop? Sounds like a great formula to me.
Aldi has been hovering at the fringes of the radar screen in my local market area for well over a decade. These stores had a limited but loyal fan base and the brand obviously did well enough to open up a new location or two each year.
There is almost no advertising, so most new customer acquisition for Aldi seems to come from word of mouth. Therefore, is is reasonable to assume that most shoppers who go there for the first time have some inkling they are going to Aldi for the price, not the ambiance.
With the rise of Sam’s Clubs and even more so with the recent exuberant entrance of Costco into the mix here, there is a new acceptance, even “sexiness” to spare/ barebones/ warehouse/ bag-your-own grocery shopping coupled with the subtle removal of some of the perceived “class” issues. Aldi appears to be benefiting somewhat from this change of attitude and I think they will continue to do so for the simple reason that, compared to their competitors, Aldi’s prices are unbelievably low on most items. They also carry a decent mix of familiar brands and quality private labels. They allow you to bring your own bags in which to carry home your purchases.
Aldi is an acquired taste and is not an emporium that goes “beyond the basics” in fresh meats or produce if those items are on your grocery list. However, if you are entertaining a houseful of your teenage son’s friends, going on a holiday baking frenzy, replenishing your larder, or making a donation to your local food pantry there is no place in town like Aldi at which to stock up (for about half of what you’d pay at Jewel).
The smaller format is making a comeback in the market. This is part of a trend where the American shopper is looking more like a European one. On the weekend they do their pantry load of basics. Wal-Mart and Costco are increasing market share this way. During the week, consumers want fresh products and shop daily or every other day. Drug stores have added food. Convenience stores have added food. Dollar stores are adding food. The new Tesco format is small with an emphasis on fresh. All this bodes well for Aldi. The issue is that the Aldi format and product selection is not targeted for all consumer groups. Therefore, I see expansion and growth for Aldi, but it’s unlikely we’ll see their customer base change much.
Aldi is capitalizing in a huge opportunity area for large families with kids, with a low income. Right now, the super centers and club stores don’t allow you to “get in, get out” quickly, if you only need to pick up a few things. When time is of the essence, limited selection may be a less important consumer decision, particularly when working against a tight budget.
Consumers will determine the products in Aldi that they like (both the product and the price) and develop a loyalty to. Any categories or brands that don’t meet their needs, they will pick up in a different store.
Aldi is enhancing the large family, low income consumer’s options. If their private label brands are “good,” and if they market themselves effectively, they will succeed within that demographic group.
As a middle-income person, I’ve been an Aldi customer for about 8 years, beginning as a buyer of EDLP bananas and gradually trying their private brands. Now they get all our basic business. I must say the quality is absolutely excellent. When we want a big choice in fresh fruits or meats, we go to Wal-Mart, Meijer or Kroger, but then, don’t most shoppers shop several stores, not just exclusively one? As the old saying goes, “If you haven’t tried it, don’t knock it.”
My uncle successfully operated a few stores just like Aldi’s. The niche is there and they should continue to do well, but there’s not a big enough opening for much more competition–no matter outside confluences.
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The first Aldi I saw back in the 80s was a converted gas station with no pumps. Canned goods were stacked on pallets on concrete floors, there was no refrigeration at the time, and the products were mostly private label overruns or soon-to-be-out-of-code. I thought they’d never survive, but we had a recession, generics became popular in conventional supers, and there were no Wal-Marts like those today. Consumers shopped for “cheap” and Aldi gave it to them. With no advertising budget to speak of (they had no idea what they could offer from day to day), they had (and continue to have) infinitesimal overhead costs.
Does anyone else see Aldi as a progenitor to dollar-type stores? The same dollar-type stores that seem to have peaked as a category? Here’s a thought: As the value of the USD fluctuates downward against other currencies, and as China gets closer to allowing their currency to be valued against the world market, the costs of many of the non-food items in dollar-types will rise, making them more dependent on food sales. Then, they’ll become more competitive with Aldi for locations and sourcing overruns and out-of-codes.
Aldi is not going to reach the critical mass Wal-Mart has been able to achieve. However, Aldi will be very successful in carving a nice place in the US retail landscape because they can secure store sites quickly and the investment for each new store is far less than most other retailers. Aldi’s clout in the US will come from them being able to create a cult-like following of customers. You can almost view them as appealing to consumers who don’t have the means or access to a Costco or Sam’s but want to feel like they’re getting club store bargains without having to buy the extra-jumbo-super size.
I have never been a personal fan of Aldi due to there limited assortment and all most all of their offerings are private label. But recently while helping my daughter shop for food while she was balancing an anemic budget, I have a new appreciation for them. I already knew that Jewel and Dominick’s had very high prices, but I was surprised at how much better Aldi is than Wal-Mart. There still is the extremely limited assortment but their prices are very good. I always wondered about the demographics of a typical Aldi customer but my guess is that it is anyone that is truly interested in saving money on groceries, whether its based on necessity or desire. There are no frills of any kind. You have to buy a bag to put your groceries in and rent a cart to shop with. The purpose of the exercise is to sell food at the lowest possible everyday price and make money. Apparently Aldi has done a very good job of figuring that out.
Aldi has been slow to gain widespread acceptance in the US, however this will change.
Aldi’s discount format, its small size and potential for providing convenient shopping in dense urban settings is a major plus.
I am a believer in America’s growing desire for smaller and more convenient shopping venues that meet there specific needs (price, convenience, assortment) and Aldi is in a position to capitalize on this trend.
I believe we will see a growing redistribution of consumer spending to an increasingly diverse retail landscape. The days of category dominance may be waning. Taking share from these vaunted retailers will be those who meet the specific product and convenience needs for diverse segments in the marketplace.
Aldis, Tesco, Kwik Trip and other C-stores like them and many other retailers who have seen the rift developing in America’s retailing environment are in my opinion those who are most likely to succeed in exploiting this trend.
Aldi’s American formula seems to be working, so why change it? They don’t need to appeal to everyone, and they’ve kept their operation simple. They’re proof that it isn’t necessary to appeal to everyone to be successful. They’ve also proved that it pays to control expansion to what your infrastructure can reasonably support. Their willingness to own their locations will be a key determinant of their longevity.
Aldi is relatively new here in Atlanta and I can pretty safely say that it will not become popular with all types of consumers. It is a very working class and ethnic clientele (at least here)and when you see obvious middle class/upper class shoppers coming in for the first time, their dismay is obvious. Doesn’t mean that it doesn’t have a [good, strong] niche or that it can’t compete with the Wal-Mart Super Center about 100 yards up the street, but it is not going to attract/keep a wide demographic.
I’m a big Aldi fan and see unlimited growth opportunities. They are the cheapest grocer by far while offering very high quality, except perhaps in produce. Aldi loves to be near a Wal-Mart Supercenter and feeds off of their traffic. They are so unique that they really do not have any direct competition. Where ever there is a Wal-Mart Supercenter there is room for Aldi to compete.
Their operations ratios, such as their $600 plus per man/hour is about three times what Save-A-Lot achieves.
I’ve seen Aldi make some merchandising changes. They are offering more unique high quality products that are hard to find at other stores, except perhaps Trader Joe’s. I do see them finding ways to attract various other types of consumers. Upscale, middle class, lower class, Hispanic, etc. are all targeted.
Aldi is a very smart retailer. I say that with confidence because they left my favorite store alone when they bought it…Trader Joe’s. I would think they would have learned how to maintain customer loyalty by running this chain and any new concept would incorporate their learning. Who says that stores need to be huge to be successful? Why not smaller footprints that can fit just about anywhere, provide a reasonable range of products, at competitive prices, and be convenient to shop? Sounds like a great formula to me.
Aldi has been hovering at the fringes of the radar screen in my local market area for well over a decade. These stores had a limited but loyal fan base and the brand obviously did well enough to open up a new location or two each year.
There is almost no advertising, so most new customer acquisition for Aldi seems to come from word of mouth. Therefore, is is reasonable to assume that most shoppers who go there for the first time have some inkling they are going to Aldi for the price, not the ambiance.
With the rise of Sam’s Clubs and even more so with the recent exuberant entrance of Costco into the mix here, there is a new acceptance, even “sexiness” to spare/ barebones/ warehouse/ bag-your-own grocery shopping coupled with the subtle removal of some of the perceived “class” issues. Aldi appears to be benefiting somewhat from this change of attitude and I think they will continue to do so for the simple reason that, compared to their competitors, Aldi’s prices are unbelievably low on most items. They also carry a decent mix of familiar brands and quality private labels. They allow you to bring your own bags in which to carry home your purchases.
Aldi is an acquired taste and is not an emporium that goes “beyond the basics” in fresh meats or produce if those items are on your grocery list. However, if you are entertaining a houseful of your teenage son’s friends, going on a holiday baking frenzy, replenishing your larder, or making a donation to your local food pantry there is no place in town like Aldi at which to stock up (for about half of what you’d pay at Jewel).
The smaller format is making a comeback in the market. This is part of a trend where the American shopper is looking more like a European one. On the weekend they do their pantry load of basics. Wal-Mart and Costco are increasing market share this way. During the week, consumers want fresh products and shop daily or every other day. Drug stores have added food. Convenience stores have added food. Dollar stores are adding food. The new Tesco format is small with an emphasis on fresh. All this bodes well for Aldi. The issue is that the Aldi format and product selection is not targeted for all consumer groups. Therefore, I see expansion and growth for Aldi, but it’s unlikely we’ll see their customer base change much.
Aldi is capitalizing in a huge opportunity area for large families with kids, with a low income. Right now, the super centers and club stores don’t allow you to “get in, get out” quickly, if you only need to pick up a few things. When time is of the essence, limited selection may be a less important consumer decision, particularly when working against a tight budget.
Consumers will determine the products in Aldi that they like (both the product and the price) and develop a loyalty to. Any categories or brands that don’t meet their needs, they will pick up in a different store.
Aldi is enhancing the large family, low income consumer’s options. If their private label brands are “good,” and if they market themselves effectively, they will succeed within that demographic group.
As a middle-income person, I’ve been an Aldi customer for about 8 years, beginning as a buyer of EDLP bananas and gradually trying their private brands. Now they get all our basic business. I must say the quality is absolutely excellent. When we want a big choice in fresh fruits or meats, we go to Wal-Mart, Meijer or Kroger, but then, don’t most shoppers shop several stores, not just exclusively one? As the old saying goes, “If you haven’t tried it, don’t knock it.”
My uncle successfully operated a few stores just like Aldi’s. The niche is there and they should continue to do well, but there’s not a big enough opening for much more competition–no matter outside confluences.