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COMPETING WITH ALDI

No, it’s not easy. But here are some ideas that might come in handy.

Extreme discounter Aldi has put many grocers off balance in the 32 states where it operates. Now Lidl — also from Germany — is building a DC in Virginia and hiring a team for its own aggressive invasion of the U.S. market.

BE WORRIED!
If you’re worried, you should be, whether you operate in the upscale or downscale arena. Both these international retailers have smashed their way into European markets and built significant share in a short time.

Let’s take a look at Aldi since it’s already here. Aldi has 1,500 stores in this country, and plans to have about 2,000 by the end of 2018. This month, it will open its first stores in Southern California, and it just started accepting credit cards nationwide, promising not to raise prices as a result.

Aldi says it has 30 million customers saving up to 50% on their grocery bills. The lowest prices, of course, are on its own-brand items. Aldi brands make up 90% of its food offerings. To build customer confidence, it offers a “double guarantee” — you can return any Aldi food item for any reason and get a replacement product and a refund.
Variety at Aldi stores is very limited, so fill-in shopping at a larger store is definitely necessary. You’d be wise to make a variety statement both in your stores and in your ads and promotion.

Pricing at Aldi is tough. Where I live, a major grocer was offering milk at $3.49 while it was only $1.99 at Aldi. If you’re competing with Aldi (and someday Lidl), you’ll want to keep a close eye on competitive pricing, especially in the relative handful of items with fast turns where shoppers have a good idea of the prices. Match or beat when it seems appropriate, but do stay up to date on what they’re up to.

If you’re upscale, never expect a free pass from Aldi. When I visit Aldis near me, I’m always surprised by the number of Mercedes and BMWs in the parking lots, and the number of expensively dressed shoppers carrying cloth shopping bags from upscale supermarkets.

If you accept coupons, and especially if you ever do double coupons, promote that against Aldi, which doesn’t take them. You can do a comparison basket showing how your shoppers can actually save money in your stores by using the coupons.

Guarantee or no, some shoppers are going to be leery of Aldi private label. When I had to duke it out with Aldi, I looked at key items in dairy and brought in no-name labels to compete. I didn’t want to weaken my own private label by footballing the pricing. Frankly, the no-name private brand was as good as my own private label and was packed by the same company. No, I didn’t sell much of it, but I had it and it made a price statement.

Stress your branded variety. Aldi doesn’t have that, and face it — shoppers are very loyal to certain brands. Do all you can to lure shoppers to your stores with deals on hot branded items.

If you go on Aldi’s website and click on the flyers at stores near you, you’ll see the chain is pushing health in a big way. Here’s a sample of what the flyers say: “Simple food minus the FLUFF and not-so-good-for you STUFF,” “Each item is free from 125 artificial ingredients and preservatives” and “A simpler approach to better food.”
If you aren’t touting the healthiness of your own foods — especially in private label — you’d better start now before Aldi takes the high ground and steals some of your shoppers. Aldi sure isn’t Whole Foods, but you don’t want it taking any share from you.

There are a few other hassles with the Aldi shopping experience you can use against them. Want to use a shopping cart? Well, pay 25 cents to borrow one, and you’ll get your quarter back when you return it. Want to find a sales clerk on the floor to help? Yeah, right! Want someone to bag your groceries? No. Want a shopping bag to put stuff in? It’ll cost you.

Aldi is tough, and Lidl will be, too. Lidl has about 10,000 stores in 26 countries all over Europe, where it turns in $84 billion in annual sales. When it opens its first U.S. stores by 2018, they’re expected to be in the range of 33,000 square feet. Do your research, and have a plan!

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