Behind the scenes at Aldi's $3.4bn store expansion in the United States
Aldi, the German discount chain, has laid out more of its US retail strategy that will see it inveset $3.4 billion and open up to 2,500 stores by 2022. The group has already succeeded in markets rights around the world and now has over 10,000 stores in 18 countries and annual revenue of around $83 billion.
But it is yet to conquer America.
It is achieves its 2,500 store target it will at current values and sizes make Aldi the country's third-biggest grocery retailer, behind Wal-Mart Stores and Kroger. That's not Aldi is new to the US. It was one of its original markets and now has 1,700 stores across the country. It is thought Aldi's size and backing means it is better placed than other grocers to compete with Amazon's aggressive new US retail strategy with the purchase of Whole Foods Market.
Aldi continues to play its cards so close to its chest. Like a professional poker player.
But where it will continue to have an edge is in having a far more limited range than its US competitors. It might be hard for suppliers to get in to Aldi but once they are then there is much more loyalty. Most Aldi stores stock between 1,300 and 1,600 items, depending on the country.
By having so few brand names it is able to negotiate lower prices from its suppliers. In the US an average Aldi basket of 30 typical household items is 17% lower than Wal-Mart's, according to Customer Growth Partners.
Trader Joe's operates a similar scaled back operation with on average 1,100 items.
"The typical 40,000 square-foot supermarket is a dinosaur, and it's extinct," said Phil Lempert, an American grocery retail expert in the WSJ. "Those stores need to die."
Aldi believes the US consumer is looking for simpler choices in their shopping an and following similar trends in Europe where people are looking to spend less, and buy more frequently. "Shoppers are, more than ever, seeing the appeal in a small format, quick-trip-type store that offers low prices and high quality," said Mike Paglia, director of retail insights at the Kantar Retail consultancy in America in the Wall Street Journal.
It sees wine as a key attraction for its target middle class consumer. Offering both cheaper standard wines but also wines that can score as much as 93 for a $4.99 Spanish Grenache red wine.
"Aldi is like a lighthouse," said Michael Lohse, spokesman for Germany's Farmer's Association. If its prices move, other retailers "have to follow them."