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Aldi Grows in New York City - Quietly

October 4, 2012

Aldi has opened its fifth New York City store, but this time it's a bit more special because the store is in Manhattan, not the outer boroughs, so it may be more of a test for the format than the Bronx, Queens and Staten Island locations. As a RetailWire discussion noted a year-and-a-half ago, Aldi entered New York City in early 2011 quietly, and it is true of this store also. The chain supported the opening mainly with a circular and an email to local residents. The grand opening crowd was good, if not huge, and shoppers lined up expectantly for the 9:00 a.m. opening.

The unit is in a large shopping mall in Harlem on East 116th Street overlooking the East River. It shares the mall with Target, PetSmart, Marshall's and, interestingly, Costco. Local competition is skewed towards bodegas. The nearest big chain supermarket is an extremely busy Pathmark at 125th and Lexington.

Compared to the bodegas, and the Pathmark for that matter, Aldi offers highly competitive prices.

Along with the low pricing, the new unit is a standard Aldi store, with 20,000 sq. ft. and 1,400 SKUs of the most popular consumer products. Center store displays feature cut cases, coolers make up most of the perimeter, produce is bagged and shopping carts are rented out. Around 99 percent of the items are private label. The only national brands are in the special buys promotional section, along with some non-foods/HBC items.

Aldi uses about 200 different labels in its private label program including Happy Farms, Welby, Beaumont, Boulder, Donut Store Brand Coffee, Gold Hen, Friendly Farms, Chefs Cupboard, and many others. In fact, at the opening, it was interesting to watch shoppers discussing among themselves — usually favorably — Aldi's various store brands and to what they were equivalent.

Aldi banks heavily on the formula that has made this 1,200 store U.S. chain a success story: low prices, very high quality store brands, and a compact, easy-to-shop store. The chain promotes with weekly special buys and a circular available online. It also has a web page for products whose prices have been lowered. Shoppers can sign up for emails of the weekly specials and there is a smartphone app.

The chain is on a U.S. growth trajectory with 80 stores coming on stream annually across the country. More New York City units are planned — the next is Brooklyn — as Aldi makes itself a force in the metro market.

Discussion Questions:

Will Aldi need to make any changes to the way it operates, such as being more promotionally aggressive, to make it big in the difficult-to-please New York City market? Given that it features an array of labels that are not familiar to many, will it need to add more name brands, increase sampling or make other changes to succeed?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How likely is Aldi to become a major player in the New York City metro area?

Comments:

Aldi doesn't need to change anything. For as long as I can remember, "experts" have been telling me Aldi wouldn't make it in Community X or Community Y. Pundits have also long detailed how Aldi would have to do this or that to survive.

And Aldi just keeps on truckin' as they used to say.

One of these days the pundits are going to wake up and notice Aldi's record of decades of quiet, but sustained success.

No doubt it's easier to compete when people write you off as an non-starter, but my bet is they'll be just fine doing their own thing. As the tortoise said, "Slow and steady wins the race."

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Ryan Mathews, Founder, ceo, Black Monk Consulting

I think Aldi will succeed in NYC by being true to themselves. Aldi operates with many practices that are different from US grocers and their clean, no frills, good value brands will help them differentiate versus being "me too" and playing someone else's game. I like their pragmatic approach in entering new markets. They have a streamlined inventory and this provides a supply chain simplicity. All this also means they can more easily adapt and adjust as they go in local markets.

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Diana McHenry, Retail Client Partner, SAP for Retail

New York is expensive.

Aldi is cheap.

They are going to kill it.

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Ben Ball, Senior Vice President, Dechert-Hampe

I think the current methods of promotion that Aldi uses (circulars and emails) will work fine when targeting the neighborhoods where the stores are located. Private labels work in New York City -- most stores in NYC stock private labels -- so why not a store full of private labels? I am a proponent of human interaction on the sales floor, so sampling and educating consumers will help with Aldi's success. Consumers are no different in NYC -- they are looking for convenience, quality and reasonable prices.

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Zel Bianco, President, founder and CEO, Interactive Edge

Aldi has a distinctive strategy that resonates with a group of consumers. Assuming Aldi did its research and knows that group of consumers exists in New York City, there's no reason to doubt that they will be successful.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

Some of my American friends drive miles to get to Aldi (yeah, I know you guys do this all the time for anything and everything) and then stock up with favourite products -- of which they have many. Or get friends and relatives to send them stuff.

In England, last week we had a major announcement of Aldi's growth in sales and popularity as well as expansion plans. I love Aldi and hope that they continue to go from strength to strength. I have not yet seen their downside. They definitely seem to know what they're doing and how to get their message across to both new and loyal customers.

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Bernice Hurst, Contributing Editor, RetailWire

Aldi needs to make zero changes. I would never second guess what Aldi does. They are successful with their business model. They grow at a reasonable pace. They refrain from debt. Aldi is the best in operating their kind of format. In reality, they are the only one with this format. The imitators don't even come close.

David Livingston, Principal, DJL Research

Aldi has implemented a winning strategy of using good quality private label, low prices, and low overhead, giving the consumer value for the important stock-up items. While Aldi does not have a great selection, it will take a big slice out of the stock-up trip.

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Joe Nassour, Chief Technology Officer, RetailTactics

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