Thursday, November 1, 2012

Will Aldi apply some of what it's learned from Trader Joe's in the German market?

I read that Aldi, which has long been a dominant grocery retailer in its native Germany, now finds that German shoppers are gravitating to shops that offer a slightly more upscale environment and merchandise mix. So it seems that Aldi Nord (the company that operates Aldi stores in Northern Germany and which also owns Trader Joe's) may seek to apply a little Trader Joe's magic to its austere brand.
Small, dark, and cheap. Those have historically been the traits of Aldi stores. A shop like this one is what comes to mind when most Germans think of Aldi. They also think, "Those guys save me lots of money." Until now, that's been good enough, but it seems German shoppers now crave nicer shopping experiences.
Both Aldi Nord and Aldi Sud (the parent company of the U.S. Aldi stores) have had success exporting Aldi's small/deep-discount/house-brand formula to foreign markets. But at home, the two Aldi chains which (taken together) were the single largest player in the grocery category in Germany, have fallen behind rivals with bit less of an East-bloc vibe.

Now, Aldi stores are starting to stock a few more name-brand products, like Coke and baby foods (where customers have particularly strong brand preferences.) Some stores have in-store bakeries. Although Aldi is ever-secretive, the word is that Aldi Nord plans to spend about $350M on renovations to its 2,500 or so stores over the next couple of years. Aldi Sud has similar plans.

New Aldi stores will probably look more like this snazzy UK one.
Aldi Nord already sells a few Trader Joe's products in its German stores. It remains to be seen whether the company will tap Trader Joe's expertise to revitalize its own brand. The stores are similar in some ways; both have fewer SKUs than most supermarkets, although Aldi has far fewer even than Trader Joe's.

The big difference is that Aldi stores have made a science of operating with the bare minimum staff. Fast-selling products are displayed right on the pallets, just as they came off the truck. By contrast, Trader Joe's stores have more staff per square foot than most grocery stores, in order to maximize contact between the brand and its customers.

How many cues will Aldi Nord take from its successful American kid?

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