Refrigerated & Frozen Foods Retailer

Our pals at RetailWire discuss PL Buyer’s story on the success of Aldi.

Aldi, with 1,000 stores in 29 states, is famous for its no-frills approach, limited assortment, private label, low prices and profit. Our sister publication, PL Buyer (Private Label Buyer) recently named the Batavia, Ill.-based chain (part of the Aldi Sud division of the German Aldi company, although it operates independently) as its Retailer of the Year, and held forth on its success and aggressive expansion plans. Lately, new products have been skewing more upscale, with stores spiffed up as well.

 

So the “brain trust panelists” at RetailWire discussed the PL Buyer story, written by the noted author Kathie Canning. Here are some of their comments, edited for length.

 

Probably the real sales generators in Aldi stores are the limited selection with the consequent clarity of the offer. These are two separate issues, but closely related. The limited selection radically reduces choice angst. But the other side of this is that the fewer the SKUs, the larger the displays per SKU. This means that every display, even those down the aisles, have some of the essential character of endcaps — limited selection and large display. This limited selection and large display can be implemented anywhere in the store, not just on endcaps. This is one proper way to manage “the big head,” the high volume 1% of supermarkets, which may be more like 10-20% in an Aldi’s. Since Aldi’s (like other big head stores before them) continues to proliferate SKUs (but at a much lower level than the typical supermarket), it proves that a long tail is important in any retail store. In a 40,000 SKU supermarket, 20,000 of those SKU generate, in aggregate, less than 4% of total store sales. But this massive amount of parked, mostly non-selling merchandise, is very attractive, in the sense of bringing shoppers into the store.

The fundamental rule is that the long tail attracts shoppers to the store, where they mostly buy the big head. One major reason I shop Amazon for my few books is that with 50 million in their offer, I can be quite certain they will have those few I want. If Aldi can just resist the sales suppression that most retailers embrace by “hiding” the big head in the long tail, in the hopes of frustrating the shopper into more purchases. Trying to sell more of the long tail by keeping shoppers in the store longer is brain dead standard retail strategy.
— Herb Sorensen, Global Scientific Director, Shopper Insights, TNS Sorensen

 

 

They understand their target customer, and they don’t try to be something they aren’t. They gained their momentum selling staple products, to people looking for the best value possible, never increasing the size of their store footprint, and never offering services that didn’t meet the needs of their targeted consumer.

— Joel Warady, Principal, Joel Warady Group

 

Aldi has persevered. They were not too successful in the U.S. initially. More recently, the economy changed, Aldi marketed more aggressively and many more people were exposed to their stores and their array of private labels, which seem to be “cousin-like” to the other Aldi company, Trader Joe’s. Now Aldi is expanding into new geographies for additional growth in America. Go to an Aldi store. Look at the customers. Many appear to have found some status sovereignity in Aldi. That is a powerful marketing asset for Aldi and it will likely grow with their price conscious customer just as Trader Joe’s has grown with its niche.
— Gene Hoffman, President, Corporate Strategies International

 

Aldi is growing for all the obvious reasons associated with the recession but also because the “brand” is being widely advertised and marketed more heavily in markets where before it was not.
—      David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates

 

RetailWire Instant Poll Results

How would you rate the expansion potential for Aldi expansion in the U.S.?
Significant       77%
Moderate         17%
Small               2%
Virtually            0%
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