retail news in context, analysis with attitude

Time has a piece this week that focuses on Aldi, noting that it may be the perfect format to appeal to consumers who are “spooked by the gravest economic crisis in decades,” and are migrating from traditional supermarkets and more upscale stores to places where they believe they can get a bargain.

Aldi is responding to the economic with a spurt of expansion in the US. It “now has about 950 stores in 29 states and plans to open more than 100 stores in the next two years in Connecticut, Missouri and Texas. The company will have opened 100 new stores by the end of the year, double the number opened last year.”

The operating advantages of an Aldi, according to Time:

• “Aldi concentrates on selling core, high-volume grocery products, like ketchup, cereal and coffee. Want a choice? Forget it. By offering a single brand, usually a private label, in a single size, Aldi executives say that they can substantially undercut conventional retailers on 90% of the products the store sells.” Plus, it offers “a limited inventory … squeezing out all unnecessary costs, from coupons to butcher shops to fancy displays.”

• Aldi’s typical small 10,000 square foot size allows it to “penetrate urban markets where real estate is generally more expensive than in suburban locales, and also allowed the company to carve a niche in neighborhoods that supermarket chains neglected. Operating costs are as spare as the rest of the place.”

KC's View:
Because Aldi focuses so relentlessly on value, it seems to me that this makes it even more important for the retailers that compete with it to define the values that differentiate them.