Photo: Aldi
Is Aldi about more than just low prices?
Through a special arrangement, presented here for discussion is an excerpt of a current article from Frozen & Refrigerated Buyer magazine.
“The Aldi of today is not the Aldi you once knew,” observes Kathy Hayden, SVP/general manager of customer success at Inmar Intelligence.
Beyond its sometimes shockingly low prices, “Aldi has continued to offer a variety of products in each category that cater to the different lifestyle needs of its shoppers, including natural, organic, plant-based and gluten-free,” which consumers are not accustomed to finding in a limited assortment discount store.
On one recent visit, for example, we spotted everything from plant-based patties and keto ice cream to organic almond milk and cauliflower crust pizza. And then there are the “gourmet” items, including European meats and cheeses, high-end frozen appetizers and premium desserts, plus a wide array of seasonal favorites.
Many of those products are “get ‘em while they last” in-and-outs included in the chain’s Aldi Finds program, which creates the treasure hunt experience for which the retailer is known. Beyond impulse purchases, these “special buys” support perpetual market testing.
Bill Bishop, chief architect at Brick Meets Click, notes, ‘“It’s a win-win because shoppers get to try new products and the retailer gets to see how the market responds to those products without a big investment.”
Between Aldi Finds and regular buys, industry observers say the chain’s offer is “more than sufficient” for a full shop.
“Even though the range is limited, it’s far more extensive than at other discount formats like dollar stores — with a more comprehensive assortment of fresh and frozen,” says Neil Saunders, managing director of retail at GlobalData.
“Plus, Aldi really prides itself on the quality of its own brand products in particular. Coupled with low prices, it provides a very strong value-for-the money message.”
In the current climate, Aldi’s private label focus, lean cost structure and better-than-average pay is expected to help tackle retail’s triumvirate of challenges: supply chain disruptions, labor shortages and inflation. Any slowdown in coming months should offer more opportunities to gain share as consumers trade down and discover Aldi’s more than rock-bottom prices.
Mr. Saunders said, “Aldi shouldn’t be dismissed as a low-price, no-frills retailer because that is not how it is positioned now.”
Discussion Questions
DISCUSSION QUESTIONS: Do you agree that Aldi in the U.S. has evolved way beyond price? What obvious and less obvious challenges does Aldi place on competitors as it has evolved as a limited assortment grocer?
Poll
Loading …BrainTrust
Dave Wendland
Vice President, Strategic RelationsHamacher Resource Group
Melissa Minkow
Director, Retail Strategy, CI&T
How would I know that? I visited my local Aldi once, when it first opened, and decided there was nothing there for me. It was too chaotic. I never went back. So actual marketing is in order, I think.
Anecdotally, I hear many more speaking about the quality of Aldi over price. This suggests that their limited assortment, focus on private label, and surprise-and-delight philosophy goes far beyond value-priced grocery items. Well done, Aldi.
They not only raised the bar, but I believe they also set it extremely high!
Aldi couldn’t enjoy the loyalty and frequency of visits that it does if price were its only advantage. Aldi does a brilliant job of knocking off national brands, not only in quality but also in almost-can’t-tell-the-difference packaging that stops just short of shameless. It complements that strategy by leaning into unique flavor profiles that blur direct comparison. Aldi’s employees are engaged, efficient, and knowledgeable, adding another layer of differentiation. As if that weren’t enough, Aldi stores are often located short distances from Walmart supercenters, allowing the otherwise non-descript boxes to get attention and set the hook for future visits. Aldi has a winning formula but it’s not one-note.
Aldi has been about more than low prices for a very long time. Although Aldi is basic in some ways – packing your own bags, limited customer service, and so forth – it also invests in its food and has won quite a few awards for various food and drink items. Its newer stores are also pleasant and modern – much more so than some of the shabby efforts by traditional U.S. supermarkets like Albertsons. The reason Aldi does so well is it offers great value. If it competed on price alone it wouldn’t have generated anywhere near as much growth as it has.
Aldi has a proven clear strategy and is not comparable with other discounters (except Lidl). It is not just about prices. Aldi is (also) first class in terms of efficiency, the private label products often have a very high quality and supply chain relationships with suppliers are often long-term. In the last few years, Aldi successfully enlarged the assortment reflecting new demands of customers (gluten-free products, more convenience, more fresh food, etc.). Competitors need to watch out, as with the enlarging product assortment the reasons to go and shop somewhere else (in addition) is becoming fewer.
So it looks like they are moving away from pricing being the primary reason to shop there and and moving the focus to assortrment and treasure finds. This will allow them to respond to the cost increases by package and product manufacturers. It’s a smart move and the timing is definitely appropriate.
Their metamorphosis has been natural, inspiring, and welcomed by their patrons.
Aldi does have the right tactics in place to confront the supply chain crisis, and it’s subtly and slowly evolved its experience. The problem is, if a consumer doesn’t go in, they’ll never know that. That said, I like that Aldi has protected the model that originally allowed the brand to break through. By not promoting its evolution, it’s able to maintain the lack of pretension that made it so successful.
Aldi’s current strategies and operating model shifts have proven that while it is a critical competitive advantage, discount pricing is not enough of a value proposition for the customer seeking higher quality products. Aldi is positioning itself in the more holistic, natural, organic, plant-based, and gluten-free product assortment space with a significantly greater focus on health and wellness.
However Aldi will need to invest significantly in digital marketing, social media content, and other channels to evangelize that they are now in a more holistic and organic space while offering everyday low process. An increased awareness, along with a more robust loyalty program, will go a long way to change the Aldi narrative.
Aldi’s has not only evolved beyond being a low-priced place to shop but has proven three things: 1. You can get quality products at a low price. 2. You don’t need a giant store to meet your grocery shopping needs. 3. Shopping can still be fun.
On a separate note since the first item on today’s RetailWire was about theft and security: Because of the layout of the store, I think most shoppers feel safe and that shoplifting is not as much a problem as most grocers face.
To me, the question is: should we view Aldi’s growth as a new entrant, or just an expansion (of an existing and successful retailer)?? The latter, of course is unremarkable; the former much less so. The issue really is how much experience can transfer from Germany (and, to a lesser degree how quickly can they recognize what doesn’t, and adjust accordingly).
So far so good. But they’re still at the early stage where – much like ‘Trader Joe’s – they can put smallness to an advantage by developing a cult following. The big challenge will be when expansion demands they take on trappings of a conventional grocer; that field is very competitive (he deadpans).
Through word of mouth, I hear increasingly that Aldi is more about high quality for the price (e.g. value) and strong curation and discovery of products. With the right marketing, Aldi could certainly grow this sentiment and become much more than just a low-price source of groceries — they have a loyal fan base that certainly helps amplify that message!