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Market growth was 1.4% in the 12 weeks to 16 June 2019, according to the latest results from Kantar. Performance has slowed compared to this time last year, when growth was 2.1%. We look at the factors influencing this and key retailers' performance.

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We look the continued evolution of Aldi and Lidl UK, including three key areas the retailers are focusing on.

1. Small store expansion in London: appealing to the city shopper

After the successful trial of its first 'Local' store in Balham, South London, Aldi has announced it will be opening seven more. According to The Grocer this will include a new store to open in Camden on 27th June and conversions in Archway, Eastcote, Kingston, Kilburn, Tooting and Romford.

The new stores will be around half the size of typical Aldi stores. The range will be reduced from 1,800 SKUs to around 1,500. In order to tailor the 'Local' branch to its city location, non-food 'Special Buys' and larger pack sizes have been removed from the range. Aldi told The Grocer this is to make the store easier to shop without a car. Maintaining breadth of range and space for fresh is essential, as our ShopperVista data has revealed produce is the most shopped category in Aldi.

Aldi has emphasised this is not a move to expand into convenience, and the roll out is still part of its trial. However, expansion in city centres, and particularly London is often challenging for discounters with a lack of the larger sites with car parks they typically target. Continued innovation in small formats gives the retailer more opportunity to grow its presence in these areas and target new shoppers on different missions.

There is a sizeable opportunity for growth in London, however the competition for the best sites is intense. Our ShopperVista data shows 53% of London shoppers would use an Aldi or Lidl more if there was a store closer to them. Subscribers can read more about this in our UK discounters: factors influencing growth report.

Aldi's announcement followed on from Lidl reporting it will be investing £500m in expansion in small London stores over the next five years. This will include 40 new store openings that are smaller in size to the traditional Lidl stores. The retailer has said;

"London is at the heart of our growth plans across Great Britain."

2. Developing online: growing presence and attracting new shoppers

Aldi will be extending its relationship with iForce, showing continued investment in its online platform. iForce is an Eddie Stobart retail logistics services firm that currently support Aldi delivering its non-food 'Specialbuys' and wine products. iForce has said;

"The extension of the partnership will mean that iForce can look at developing Aldi's online proposition to grow its market share across the UK."

iForce believes that the scope of Aldi's online proposition has continued to expand and with the partnership they will grow this further.

This comes after the announcement that Lidl is "actively exploring" ecommerce in the UK for the first time.

3. Sustainability: new initiatives to reduce plastic waste

After its successful plastic free trial in Scotland Aldi will be rolling the initiative out to all stores in the UK by the end of 2019. According to Aldi the trial has already saved more than three tonnes of plastic since its launch in March.

Aldi has also recently removed all plastic bags from its stores. The retailer has pledged to reduce its plastic packaging by 25% by the end of 2023.

Lidl has pledged to reduce its own brand plastic packaging by 20% by 2022. By 2025 the retailer is looking to ensure 100% of its own brand packaging is widely recyclable, reusable or refillable. It is also looking to increase the recycled content of its own brand packaging to 50% by 2025. 

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From July onwards Aldi will be replacing its plastic bags with paper and biodegradable ones.

Paper or biodegradable trial

Half of Aldi's stores will trial paper bags and the other half, biodegradable ones. The biodegradable bags are made from a biodegradable material called Bioplast and will be compostable within 12 months. When the trial ends Aldi will roll-out whichever is more popular across its entire estate.

Fritz Walleczek, Aldi's managing director of corporate responsibility told Retail Gazette;

"Cutting waste is part of Aldi's DNA and we are constantly looking for new ways to reduce our environmental impact. This new trial is one of the biggest we have ever launched because we want our customers to be involved and help us make the right decision for them and the environment."

Aldi has pledged to reduce its plastic packaging by 25% by the end of 2023. One initiative contributing to this is its plastic-free trial on five fruit and vegetables currently taking place in Scotland.

Want to know more about what other retailers are doing to reduce plastic waste?

Read here about;

  • Tesco plastic-free packaging trial on 45 products
  • M&S plastic-free produce aisles trial on over 90 lines of loose fruit and vegetables
  • Iceland aims to be plastic-free by 2023
  • Morrisons introduced plastic-free areas where shoppers can buy 127 varieties of loose fruit and vegetable
  • Waitrose launched a packaging-free bring-your-own container trial
  • Sainsburys announced plans to replace plastic bags across loose fruit, vegetables and bakery items with paper alternatives

Sign-up here to receive our free newsletter that will keep you up-to-date about the latest news and developments from Aldi and the discount channel.

 

 

On 7 June, Aldi Süd opened its first two physical stores in Shanghai, China. The stores present a completely different and very premium look and feel compared to its stores in Europe and US. They also offer services that are not usually seen at discounters, such as counters and a scan and go payment solution.

Very premium look and feel

Source: Aldi China

Aldi has decided to use a very different and premium design compared to its traditional look and feel globally. Overall it offers a shopping experience closer to a supermarket than a discounter. The stores present a smart ambiance thanks to modern graphics (artistic design and brick walls), combined with bright lighting and wood materials.

Source: Aldi China

The low fixtures enable shoppers to see through the store and improves the shopping experience. The use of shelf-ready packaging is very limited with most products displayed outside of their boxes. Finally, electronic price tags are used, aligned with the stores’ more premium and modern experience.

Reduced range and differentiating offer

Source: Aldi China

According to Aldi, products have been carefully selected to meet local shopper needs. The range has been carefully curated to offer 1,300 products across 15 categories. Fresh produce, dairy and meat are mainly sourced in China. The retailer offers some private labels exclusive to China alongside many other European-imported products, such as wine and beer.

Source: Aldi China

 

Checkout-free store

Shoppers can scan their articles on the go and pay via the WeChat mini-program before leaving the store. To encourage shoppers to use the app, the stores only have a limited number of checkouts. It shows the capacity of Aldi to adapt and evolve its concept to meet shoppers’ expectations. It’s a very interesting move for Aldi from a European perspective as queues at tills are usually the downside of the shopping journey.

Source: IGD Research

Shoppers can access specific offers and benefits by becoming an Aldi member. Lidl already offers this service in selected countries, but this is new for Aldi. It shows the retailer’s strategy to collect shopper data, which will help it improve its concept in China.

Source: Aldi China

With these first two stores, Aldi shows its intention to move away from its traditional format and offer a more premium experience to Chinese consumers. The stores blend supermarket and food-to-go offers with very few remaining elements of a discounter. In terms of price positioning, Aldi is committed to guarantee everyday value to shoppers.

As mentioned previously, several western retailers have tried to enter China but did not succeed. It will be interesting to see how Aldi performs in the next few months and what learnings it could bring to other markets.

Keep up-to-date with the latest developments of international retailers. Sign up to our Asia and Discount specific newsletters.

Maxime Delacour

Senior Retail Analyst - Discount

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