Is there any stopping Aldi as it makes SoCal move?

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Discussion
Feb 25, 2016
George Anderson

Aldi has grown to be one of the nation’s largest grocery chains, attracting legions of customers to its small box stores with low prices on its limited selection of predominantly private label foods. Now, the chain that Supermarket News ranked number 22 on its list of the top 75 grocery retailers and wholesalers in the U.S. and Canada, is about to become even bigger as it opens stores in the Southern California market for the first time.

On March 24, Aldi will open the first eight of 45 planned locations in Southern California for 2016 with stores in Beaumont, Fontana, La Quinta, Lake Elsinore, Moreno Valley, Palm Springs, San Bernardino and Yucaipa.

“We are unlike any other grocery store in the market right now,” Gordon Nesbit, division vice president for Aldi, who will oversee the company’s operations in Southern California, told the Inland Valley Daily Bulletin. “We’re bringing a combination of high-quality product at exceptionally low prices. And that’s really the value proposition we’ve been offering customers throughout the United States for the last 40 years.”

The combination of factors Mr. Nesbit described has helped Aldi become not only one of America’s biggest, but favorite grocers. In a 2015 consumer poll by Market Force Information, Aldi ranked third behind Trader Joe’s and Publix as America’s favorite supermarket. Consumer Reports put Aldi as number 14 on its list of the best supermarkets in the U.S.

Jack Brown, executive chairman of Stater Bros., told Supermarket News that he doesn’t expect Aldi opening to have a significant impact on his company’s business. Mr. Brown said Stater Bros. has succeeded for 80 years with larger stores, broader product selection and service. He doesn’t expect to change that with a new competitor in the market.

Photo: aldi.com

DISCUSSION QUESTIONS: How do you expect Aldi to affect the grocery market in Southern California? What adjustments, if any, do you expect grocers in Southern California to make with Aldi entering the market?

Braintrust
"The assortment is random and the layout incredibly hard to make sense of. One step you’re in produce, the next step you’re looking at beach towels. I just don’t find it shoppable."

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14 Comments on "Is there any stopping Aldi as it makes SoCal move?"

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Ben Ball
BrainTrust

The demographics of the Inland Empire would seem to be ideal for Aldi. They should also do well in SoCal in general. While “cheap chic” may not be the rage it once was, value is still in style. And everyone in SoCal loves to be part of the latest thing, right?

Paula Rosenblum
BrainTrust
I must be missing something major. After hearing all the hullabaloo over Aldi and having one open right near my home I took a visit there. I honestly didn’t get it. Long lines and a mish-mash assortment. Reminded me more of a dollar store gone wild than anything interesting. As it sits, I see it having little-to-no impact anywhere that other choices are available. If their “organic initiative” takes off it might change my point of view, but at this point I just don’t get it. A few observations: I want choice about which kind of card I use. Aldi only takes debit cards and I choose not to use them at retailers anymore. I want a modern check-out experience. The whole simulation of a cash drawer, with the employees sitting and the customers doing all the work really irritated me. I prefer to have bags provided free or not at all. Aldi charges for bags. At least in my mind, either have them or don’t. Charging a nickel per paper bag is just lame to me. The assortment is random and the layout incredibly hard to make sense of. One step you’re in produce, the next step you’re looking… Read more »
Max Goldberg
BrainTrust

As Aldi grows in SoCal, I expect it will impact pricing at nearby full-service grocers. Vons (Safeway) and Ralphs (Kroger) can use the competition. SoCal consumers are accustomed to shopping in smaller format stores — this is the birthplace of Trader Joe’s. If Aldi can deliver quality products at lower prices, it should find a warm welcome from many consumers.

Tom Redd
BrainTrust

Aldi remains focused on a specific selection or assortment and thus other grocers and specialty food stores will not be impacted. They run a very tight end-to-end operation with a bulletproof supply chain. Supply chain management is the core area that can bring real savings to the shoppers. Aldi figured this out many years ago. Keep in mind that as they see it, the store team is a vital part of that supply chain — not just getting product to the end of the right channels. GO ALDI!

 

David Livingston
Guest
5 months 30 days ago

I don’t see competitors making any adjustments because it would be futile. None of them can beat Aldi on price and Walmart can’t even come close. My advice to the competition is to forget about Aldi and focus on what you do best. The typical Aldi does about $170,000 a week, so their impact is minimal. That’s what is great about Aldi. They can open stores, make money, and no one really notices. The only grocers I’ve seen impact Aldi have been WinCo and Woodmans. In other words the grocer has to be bigger and lower-priced than Walmart. Then just maybe Aldi might give back a few dollars. In any given market, Aldi is usually far down on the market share list, but usually well above average in sales per square foot. It’s actually a very sweet spot for them.

Ed Rosenbaum
BrainTrust

Take everything Paula said, then copy and paste it here. I don’t get what the big buzz is surrounding Aldi except for the fast growth program they are in. Yes, many people will go to see what they are about. The question is, will the experience be worth a return visit? The asset might be that the pricing at Aldi’s will force the competitors to look at what they are charging and reduce some items.

Roger Saunders
BrainTrust

Aldi will succeed in Southern California just as they have in other parts of the U.S. Their value proposition offers appeal to a broad cross-section of the population. Seeing them succeed in the shadow of Walmart, Costco and local independent and publicly-traded firms leads to that conclusion. Added to that experience is witnessing Aldi’s success in varied communities from Naples, Florida to inner-cities.

The lads and lasses from Germany and Batavia, Illinois have a long term vision. They express it very clearly to their associates and they continuously tweak it when necessary.

Southern California grocers will have to make certain their own long term visions are firmly in place — understood by their associates and customers alike — and then execute, execute, execute.

Patricia Vekich Waldron
BrainTrust

Aldi is an excellent operator with a very good value proposition. As a SoCal resident I’ll probably not be shopping them, but I’ll be very interested to see how they impact the competitive (and pricing) landscape.

Craig Sundstrom
Guest

I agree with Roger. It does well elsewhere, why WOULDN’T it do well in SoCal (beyond the macro issue that California’s crippling drought continues and may eventually impact the economy)? As for our critics, however valid their criticisms may be at the personal level, the marketplace — some segment of it, anyway — doesn’t agree. This isn’t a theoretical discussion — Aldi works!

Herb Sorensen
BrainTrust
Aldi and Lidl are two European big head retailers (limited selection) who have done very well there. Aldi in the US is not the same chain, but I think the ownership is family related. Notice how Americans act as if a limited selection (big head) store with good quality just isn’t right. Never mind that Stew Leonards is doing something like $100 million PER STORE with a couple thousand SKUs and Costco is now the #2 retailer GLOBALLY with 4000 SKUs of high quality at low cost. It is like people really think that 30,000 – 100,000 SKUs is the way to go, not recognizing that those voluminous “rat maze” warehouses were not built to meet shopper demand, but to take advantage of incredible supplier demand (and funding,) for more in-store “warehouse” space. None of this means that the long tail, the tens of thousands of items that sell a few copies per month or year, do not provide an ATTRACTIVE force for shoppers – “They have EVERYTHING there at that store!” Walmart paid seriously for “The Misguided Bobbing of the Long Tail.“ But the overwhelming value of the store remains REACH — how close can you get to the shopper?… Read more »
Michael Day
BrainTrust

Based on their track record so far, have to believe — like they have done in the other areas of the country they now operate in — Aldi’s aggressive pricing (on a 90% Private Brand assortment), and shopping convenience, will have an impact on grocery competitors in Southern California. To what degree, and how material the impact of Aldi’s prices on basic grocery items will dictate the response from grocery competitors, etc.

Tom Martin
Guest
Tom Martin
5 months 30 days ago

There’s no question that Aldi will find success in the SoCal market, similar to other value-based chains like Trader Joe’s. Look no further than any news outlet and you will see a growing trend that consumers are demanding more value for their purchases. Low-cost grocery stores with higher-end products provide a reasonable alternative to higher-end foods and prices like Whole Foods. We’ll continue to see this concept grow across other retail sectors as well.

Li McClelland
Guest
Li McClelland
5 months 30 days ago

Here is why Aldi is succeeding wherever they open. The quality of Aldi’s private label goods absolutely equal if not exceed any other store’s private label offerings for considerably less money. Sure, you bring your own bag(s) to schlep the stuff home, just like many of us do wherever we shop these days. The prices amaze me. Yesterday I bought a whole pint container of heavy whipping cream for less than half of what Jewel is charging for a half pint. You do have to pick and choose what you stock up on there — not fresh vegetables or meat usually — but man, can you save a lot of money on staples to spend later at the butcher on a hunk of tenderloin.

Kai Clarke
BrainTrust

Another competitor will only improve pricing and availability in the SoCal grocery marketplace. However, we cannot ignore the presence of Safeway, Kroger, Costco and of course Walmart in this retail space. The smaller markets like Stater Bros. may have more to fear, but this is only a few stores, where these other players have established clientele who are very loyal.

wpDiscuz
Braintrust
"The assortment is random and the layout incredibly hard to make sense of. One step you’re in produce, the next step you’re looking at beach towels. I just don’t find it shoppable."

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