Aldi’s rollercoaster

aldiOn June 3, 2014, Simon Neville from the Independent in the UK wrote an article entitled, “20 year low: Sales plummet as Tesco loses out to Aldi”.

He went on to say that Tesco had suffered its worst three month sales period in 20 years as customers abandoned the supermarket at record speed, according to data.

In the Australian Financial Review on May 6, 2015, Sue Mitchell wrote regarding Woolworths Australia, “Group sales fell 2.1 per cent to $14.96 billion in the three months ended April 5, the first fall in quarterly sales for more than 20 years, as falling petrol prices and weaker revenues at Big W offset modest growth in food and liquor. Excluding petrol, Woolworths’ total sales rose just 2.3 per cent Easter adjusted to $13.77 billion”.

In a major mea culpa, Woolworths CEO, Grant O’Brien, said Australia’s largest retailer had taken its eye off the ball in recent years in its pursuit for growth and had lost the trust and loyalty of customers.

However, he said Woolworths would “not be beaten on price” and would reduce prices on thousands of grocery products to” neutralise” Coles, which has been outperforming its larger rival for 23 consecutive quarters, and “contain” Aldi, which in less than 15 years has taken 10 per cent of the $90 billion grocery market.

On May 20, 2015, Andrea Hogan from the AFN wrote that over the past few months Aldi has opened four new shops which move away from the low budget image.

The new Aldi store concept is focused on expansion of fresh produce, improved product displays, and new layouts which attempt to improve navigation.

Aldi is also aiming to cut average checkout waiting times at shops and is attempting to win over ‘ethical shoppers’ with environmental concerns being addressed for them in several new locations.

The new stores include features such as LED lights with the company being committed to reduce energy consumption. The changes follow customer feedback but Aldi is adamant that these will not affect the ability to offer low prices. Aldi’s trial centres are located in Kallangur, Queensland; Chisholm, ACT; McGraths Hill, NSW; and Highton, Victoria.

The similarity between the Tesco results in the UK and Woolworths in Australia is surprisingly close, albeit 11 months apart – worst three month results in 20 years and the loss of customer loyalty.

Due to force of circumstances I have been doing our household shopping since the beginning of the year. Aldi has cleverly opened many of its stores close to Woolworths stores.

I like Woolworths. It has a great range. I also like Aldi – its quality/price equation is great, and so what I do is visit Aldi and buy many basic items there, drop them in the car, and proceed to Woolies to get the rest.

What I have noticed is that I am not the only one using this strategy. Some of the customers that I see in Aldi, I see a short time later in Woolworths.

Aldi’s recent advertising campaign is clever. It offers reduced prices but only by a few cents. The subliminal message is, “Our prices are so low that we can only offer very little off”.

Meanwhile Aldi plans on opening 150 stores over the next few years in Western Australia and South Australia and 70 in the UK with a recruitment in the UK of almost 5000 people.

Tesco, Woolworths, and others were somewhat dismissive of Aldi when it first arrived. I guess that is history.

Stuart Bennie is a retail consultant at Impact Retailing www.impactretailing.com.au and can be contacted at stuart@impactretailing.com.au or 0414 631 702

Comments

4 comments

  1. Graham posted on May 22, 2015

    I do exactly the same Stuart - shop at both. The strategy to site Aldi within walking distance to Woolworths and then limit your range to fast moving staples is brilliant. Negatives of Aldi is that their fresh produce is substandard (albeit cheap) it goes off too quickly. Eggs and chicken also tend to be near their use by date (as assessed by smell rather than labelled date). This last aspect seems to be constant across several stores in my area which makes me think they have delays in their supply chain. Good article. Woolies is right that "containment" is about as good as you are going to be able to achieve against Aldi given their cost model. reply

  2. David posted on May 24, 2015

    Great article Stuart. I really like Aldi's formula. They concentrate on the top 20% of the basic shop well. They don't try to be all things to all people like the majors but using their resources to introduce unique items. The special buys section takes the boredom out of shopping. As Bunnings are attracting the ladies Aldi are attracting the blokes with their tools etc.. Conveniently located with ease of entry and exit.(mostly same level parking) Aldi have done an amazing entry into the Australian retailing landscape. reply

  3. Jim posted on May 24, 2015

    There is no delay in the supply chain, it's fresh in fresh out every day to warehouses and stores, even eggs, you don't get that at the other two who amass products in their cold rooms. The difference is you MIGHT have one person looking after the produce at Aldi versus the army of staff on hand stacking and polishing at the other two. One person can only do so much. Also with people's reluctance to try it, they must max out the shelf life to reduce wastage. It's a vicious circle. Some Aldi stores do it very well, others not so well. I buy all my produce and meat at Aldi, have done for the last 10 years and have never had any major issues and find it lasts just fine if stored correctly. I can also say that I do 99.9% of my shop in an Aldi store. I may buy an odd product from the other two now and again, but rarely. reply

  4. Kathryn H posted on May 25, 2015

    The local Aldi is hard to get to with rooftop parking - if I ever go there I wonder why I bothered. I don't have time for visiting 2 supermarkets. Give me the one that has everything I need (and want). While I hate the greediness of Woollies (installing a coffee shop and restricting tenants from selling coffee) I have to say I love the Woolworths reward programme which has been giving me $15 and $20 off my next shop at various times this year. Maybe I pay more for my groceries, but it's a choice I make about how to spend my money and use my precious spare time. And I hate that consumerism that Aldi encourages - buy a drill for $20, and if it doesn't last, hey who cares? I'll just toss it and buy another. reply

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