Aldi Grows Store Base and Popularity

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August 30, 2011

Limited assortment retailer Aldi plans to open 80 to 100 stores this year, however, the chain is looking to bring its brand of largely private label retailing to new types of formats and shoppers.

Aldi Vice President Mike Jessen says the chain is looking to move away from owned freestanding stores and is considering leasing property in strip malls and enclosed shopping centers. In addition, Audi wants to move beyond its traditional demographic by opening locations in more affluent areas and those considered food deserts.

Discount department stores Walmart and Target have actively been trying to open locations in large cities such as New York and Chicago, but their massive store requirements of 100,000 to 200,000 square feet make entry difficult and community resistance is often a huge barrier. Aldi is having a much easier time of it.

The grocer began opening stores in U.S. cities in 1976, when Walmart was still a largely rural discounter and Target an offshoot of its more fashionable department store parent, Dayton’s. Aldi’s presence in city neighborhoods makes it a known entity to residents and those in charge of zoning and permitting. In cities targeted for urban retail growth such as Chicago, where non-union shops have trouble getting past city hall, Aldi slides right by.

This foothold is serving the chain well. Aldi has been accelerating store expansion in the past several years and the lingering recession attracted a new, more affluent demographic looking for budget friendly store brands. In the U.K., Aldi is growing market share at the expense of middle market retailers such as Walmart’s Asda. According to data from Kantar Worldpanel, inflationary pressure on shoppers are bifurcating the market, forcing middle-income shoppers to seek out value. Increasingly, those shoppers are finding it at Aldi.

“Discounters are attracting some new customers but most of their growth is coming from gaining a greater share of the household shopping list,” said Edward Garner, a director at Kantar. “Against this murky background, the 'two nations' effect continues unabated; customers are making a main shopping trip to their favorite store and this is then 'topped up' with selective shopping at the discounter.”

For the second quarter ended in June, Aldi and Lidl reported sales growth ahead of their British grocery counterparts, growing market share to 3.4 percent and 2.6 percent respectively, according Kantar. On the other end of the income spectrum, Waitrose is growing its share among premium shoppers.

The trends are similar to those in the U.S., as shoppers increasingly turn to budget friendly limited assorted retailers and store brands in a bad economy. And according to Kantar, the trend for shoppers to treat themselves during difficult times is also boosting sales of premium private label products.

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