How did Aldi become UK supermarket giants?
Aldi is now officially the UK’s fifth largest supermarket.
Later this month, the 700th store will open, with a further 300 planned over the next five years.
The German-owned supermarket has disrupted UK food and drink shopping, stealing market share from the ‘Big Four’; Tesco’s, Sainsbury’s, Asda and Morrisons.
Aldi’s market share has risen 0.2% ahead of Co-op, with both now taking 6.2% and 6% respectively.
According to industry insights from Kantar Worldpanel, Aldi’s sales rose 12.4% year-on-year in the 12 weeks up until January 2017, highlighting the challenges faced by the big retailers from discount supermarkets such as Aldi and Lidl.
Similarly, sales at Lidl rose by 9.4%, taking its market share to 4.5%, and in the past quarter alone, Aldi attracted an extra 826,000 more shoppers than during the same period in 2016.
So – How did Aldi become UK supermarket giants?
Understanding the customer, having empathy for a nation of shoppers affected by economic curveballs and innovating in simplistic ways have contributed to turning Aldi in to one of the nation’s most loved and trusted supermarkets. Here’s why:
1. They are great marketers
Aldi are great marketers and know exactly what to do and when to do it.
The marketing geniuses behind the brand keep their campaigns simple, but use comparisons to other brands and their pricing in their advertising at times when families are watching TV (and the pennies).
Despite being banned twice by the Advertising Standards Authority for complaints raised by rival supermarket chains, Aldi still manage to win industry awards for their campaigns, which have no catchy music, special effects or celebrity endorsements.
They simply compare prices from a rival supermarket to their own and use the price difference to ‘shock’ the viewers into learning how much more they are spending elsewhere. This strategy led them to being named the most memorable brand in 2014.
2. They keep it simple
Simplicity is the key to why many shoppers now to choose Aldi. Walking into an Aldi store is completely different to its bigger rivals. Whilst they sell the same types of products as other supermarkets, they sell one Aldi single-brand variant of its type. Different to when a shopper walks into one of the ‘Big Four’ – with numerous choices for one item; in Aldi – there is one choice, reducing the ‘decision-making process’ time.
With a nation of shoppers that are now penny-pinching, savvy and more sensible than ever, this practical and no-frills approach has become a selling point.
3. They keep it cheap
Aldi are fully aware that everyday low prices (EDLP) are of high importance to the consumer. The EDLP model stuck and unlike other supermarkets with ever-changing offers and promotions, Aldi’s EDLP model has remained unchanged, so consumers know where they stand.
Wiggenraad and Grocery Insight director Steve Dresser said in Retail Week, “Aldi has conditioned the customer towards everyday low prices. Aldi’s competitors in the market have reduced promotions, mainly because Aldi are purely EDLP and have stuck to that model.”
4. They cater to the middle class
Initially seen as a supermarket for the working class, Aldi now caters for the middle class.
During the economic downturn in the UK in 2009, whilst people were ‘tightening their belts’ – a term coined by David Cameron, Aldi witnessed their largest spurt of growth as profits soared to over £2 billion. Aldi’s middle-class scale of shoppers increased as their groceries and prices became more appealing.
Based on a Kantar poll of 300,000 shoppers at the time, it was revealed that over 50% had shopped at either Aldi or Lidl within the previous three months, highlighting that the store didn’t only appeal to the working class.
Aldi’s customers therefore changed with the times – with its proportion of shoppers classed in the AB social category rising from 13% in 2012 to 19% today. Not one to miss out on any sort of customer retention, Aldi altered stock to cater for them and introduced more luxurious items, including continental cheeses and meats.
5. They do random ‘flash sales’
Aldi are famous for random ‘flash sales’, a business model, named for its ‘burst’ of quick sales duration, usually lasting between 24-36 hours. Higher-price items ranging from tablet computers to mobile phones, ski outfits to garden furniture are sold in limited numbers at knock-down prices, encourage people to visit the store for quick bargains.
Their ‘when it’s gone, it’s gone’ slogan has consumers visiting the store in droves. One flash sale in 2014 for the Aldi Lifetab tablet, direct competitor of Tesco’s Huddle, sold out within 24 hours.
6. They focus on quality
Those who think that shopping at Aldi are losing out on quality are wrong. The stereotype of budget food shopping has diminished in recent years with their products being just as good as elsewhere.
Aldi attributes its position on being able to offer quality – on a basis of knowing their suppliers.
Aldi has a limited range of 1,500 lines, whereas larger rivals have somewhere in the region of 40,000. Aldi, see this as a main advantage.
An article in This Is Money explains this:
For example, Aldi stock three types of Olive Oil, and one of their larger competitors stocks 20.
The buyer for Olive Oil at Aldi works with just three and is therefore able to know the supplier and product inside-out because of the smaller range in size.
Joint managing director Matthew Barnes said in the article, ‘This allows us to concentrate our efforts on making this product the best olive oil on the market. It also means we buy a higher volume (per line) than our competitors do. This allows us to offer incredible value to our customers.’
A recent taste test by the Daily Mail which compared Aldi’s £2.69 Olive Oil to a £14.99 competitor from one of the big brand supermarkets – revealed that Aldi was given 10/10 where its competitor was given a 7/10, highlighting that quality is not compromised in any way using this business model.
7. They look after their staff
Aldi is the highest paying supermarket in the UK with store staff being paid £8.53 an hour upwards (£9.75 in London). Recently, nearly 5,000 staff received pay rises, making them a sought after employer in the industry. Their pay rate surpasses the National Minimum Wage and National Living Wage.
The Aldi graduate scheme is one of the best in the country, paying a starting salary of around £42,000.
Aldi’s UK chief executive, Matthew Barnes, said in The Guardian: “We recognise the valuable contribution that our thousands of store employees make every day. Their dedication and commitment is a key reason why Aldi is the UK’s fastest-growing supermarket.”
8. They differ at the checkouts
(How they thought of this is nothing short of genuis)
We’ve all seen it at the checkouts – food spilling over, rammed into the tight space which is the conveyor and the checkout assistant fumbling for the bar code which won’t scan:
Ever noticed how this doesn’t happen at Aldi?
The reason again is simple but oh, so effective. The conveyor belts are longer so they can fit the whole contents of a trolley and the bar codes are larger than other brands and are situated in three places on the product, meaning they are more likely to be scanned the first time round. These two processes mean that customers pass through the checkouts 40% faster, meaning fewer queues!