Global notes and commentary from PlanetRetail.net…
Recognising that it has failed to make much impact on the competitive UK market so far, Aldi has revealed plans to spend more than GBP500 million (USD896.7 million) during the next five to seven years opening as many as 200 outlets across the UK. The retailer currently has around 280 stores in the UK and wants to increase this to more than 450 by 2009. Scotland and Wales have been chosen as prime areas for expansion. New head offices and distribution centres for both regions are either in planning or in the process of being opened at the moment.
Longer term, Aldi believes that it can expand its UK network to 1,500 stores. The retailer currently thinks that about a third of its store base is in the wrong place and intends to move them to new sites over the next five years.
According to Markus Beher, regional managing director for Aldi Scotland (where the group is planning a particular growth push), the group's business model is simple. It offers fewer product lines - 800 against 30,000 in a typical superstore - but sells them for about 30% less than its rivals. Mr. Beher stated: "Why wouldn't we be successful? The multiples might have their value ranges, but they cannot possibly achieve the same quality at price points we can get; their costs are just too high." Mr. Beher said the discount retailer had been repositioning itself since 2000 by reviewing its product range and relocating stores to more affluent areas. "It is a challenge, there is no question about that. But we have a good advantage in terms of quality. You say at Tesco you get the brand. Yes, that's right, but the brand will cost you more than our products. We have brand quality at own label price. Probably not enough people know about that yet," added Mr. Beher.
Aldi is not the only discounter that is readying itself for a concerted growth programme. Danish-owned discounter Netto has also announced ambitious plans to expand its network to more than 1,000 stores. Intending to advertise itself as "the easyjet [a popular no-frills airline] of grocery retailing", Netto also believes that the low market share of discounters in the UK is an image problem that can be rectified by improved marketing and advertising.
Currently, most average consumers are put off by the minimalist interior design and ramshackle nature of the stores typified by products being presented in the boxes they are delivered in. The fact that rudimentary merchandising helps to keep costs low and allows the discounters to focus on their mission of offering quality food at lowest prices is a point lost on the UK shopper at present. To further change the perception of discounting in the UK, Netto will introduce more high tech features to its stores to make them more attractive to shoppers.
Aldi has plans to improve the advertising of its constant low price message, using a more consistent approach, as well as underlining the high quality of its product ranges. Rumours are rife about the introduction of a private label clothing range to attract further attention to the stores and shape up the brand image. The discounters feel that the image among UK consumers that their basic stores sell below-average quality food is merely a perception problem, which can be rectified by marketing and advertising. A little 'education' for the consumer is necessary to underline the fact that cheap does not necessarily mean nasty.
In terms of store expansion, there is still plenty of room for Aldi to expand. By setting up a new regional distribution centre and a new head office for Scotland, it is laying the groundwork to allow it to tap into this high potential area. Similarly to Scotland, Aldi is also targeting Wales for future expansion. Both areas have a low density of discount stores and Aldi's low price strategy has great potential in both regions. If Aldi, and Netto, also manage to improve their image in the eyes of the average consumer, opening several hundred new stores could indeed only be the beginning.
Recognising that it has failed to make much impact on the competitive UK market so far, Aldi has revealed plans to spend more than GBP500 million (USD896.7 million) during the next five to seven years opening as many as 200 outlets across the UK. The retailer currently has around 280 stores in the UK and wants to increase this to more than 450 by 2009. Scotland and Wales have been chosen as prime areas for expansion. New head offices and distribution centres for both regions are either in planning or in the process of being opened at the moment.
Longer term, Aldi believes that it can expand its UK network to 1,500 stores. The retailer currently thinks that about a third of its store base is in the wrong place and intends to move them to new sites over the next five years.
According to Markus Beher, regional managing director for Aldi Scotland (where the group is planning a particular growth push), the group's business model is simple. It offers fewer product lines - 800 against 30,000 in a typical superstore - but sells them for about 30% less than its rivals. Mr. Beher stated: "Why wouldn't we be successful? The multiples might have their value ranges, but they cannot possibly achieve the same quality at price points we can get; their costs are just too high." Mr. Beher said the discount retailer had been repositioning itself since 2000 by reviewing its product range and relocating stores to more affluent areas. "It is a challenge, there is no question about that. But we have a good advantage in terms of quality. You say at Tesco you get the brand. Yes, that's right, but the brand will cost you more than our products. We have brand quality at own label price. Probably not enough people know about that yet," added Mr. Beher.
Aldi is not the only discounter that is readying itself for a concerted growth programme. Danish-owned discounter Netto has also announced ambitious plans to expand its network to more than 1,000 stores. Intending to advertise itself as "the easyjet [a popular no-frills airline] of grocery retailing", Netto also believes that the low market share of discounters in the UK is an image problem that can be rectified by improved marketing and advertising.
Currently, most average consumers are put off by the minimalist interior design and ramshackle nature of the stores typified by products being presented in the boxes they are delivered in. The fact that rudimentary merchandising helps to keep costs low and allows the discounters to focus on their mission of offering quality food at lowest prices is a point lost on the UK shopper at present. To further change the perception of discounting in the UK, Netto will introduce more high tech features to its stores to make them more attractive to shoppers.
Aldi has plans to improve the advertising of its constant low price message, using a more consistent approach, as well as underlining the high quality of its product ranges. Rumours are rife about the introduction of a private label clothing range to attract further attention to the stores and shape up the brand image. The discounters feel that the image among UK consumers that their basic stores sell below-average quality food is merely a perception problem, which can be rectified by marketing and advertising. A little 'education' for the consumer is necessary to underline the fact that cheap does not necessarily mean nasty.
In terms of store expansion, there is still plenty of room for Aldi to expand. By setting up a new regional distribution centre and a new head office for Scotland, it is laying the groundwork to allow it to tap into this high potential area. Similarly to Scotland, Aldi is also targeting Wales for future expansion. Both areas have a low density of discount stores and Aldi's low price strategy has great potential in both regions. If Aldi, and Netto, also manage to improve their image in the eyes of the average consumer, opening several hundred new stores could indeed only be the beginning.
- KC's View:
