Photo: Aldi
Aldi shoppers are getting curbside pickup, but do they want it?
The latest grocer to try curbside pickup isn’t one that is generally associated with offering fancy amenities. Discount grocer Aldi has decided to launch a pilot of the service in the U.S.
Aldi’s announcement comes alongside a plan to expand its grocery delivery, which it had been piloting in a few select cities, according to Business Insider.
Added service features like curbside pickup and delivery are in keeping with attempts to compete with top mainstream grocers like Walmart and Kroger, and even boutique grocers like Whole Foods, rather than dollar stores and other ultra-low-price outfits.
Amazon recently added curbside pickup to the growing suite of services available to Prime members at Whole Foods. And as Walmart has pursued a strategy of reinvention, it has implemented enhancements like in-store pickup towers to streamline BOPIS orders and even a robotic fulfilment system for online orders.
And yet even dollar store chains have begun to play with the same kind of service enhancements that grocers have been piloting. For instance, Dollar General recently began testing a scan & go app in 10 stores throughout the Nashville area.
Despite its notoriously spartan store layout and heavy emphasis on affordable private label CPG products, Aldi has been taking steps up market as it has pursued the most recent leg of its stateside expansion.
Over the past few years, Aldi has undertaken renovations to make some of its stores feel friendlier, with wider aisles, natural lighting and even digital signage. It has also improved its produce selections and added more natural and organic products. Last year, Aldi announced its intention to become the third largest grocer in the U.S. within five years.
Enhancing its customer experience isn’t the only method Aldi is using to try to move to the top of the U.S. grocery market. The grocer has also been experimenting with new locations to draw foot traffic. Early in 2018, Aldi struck a deal with Kohl’s to open stores next to its own.
- Aldi just revealed its next assault against Walmart, Amazon, and Kroger – Business Insider
- Are Aldis upscale makeovers necessary? – RetailWire
- Dollar General pilots scan & go tech – RetailWire
- Amazon delivers latest Prime perk to Whole Foods curb – RetailWire
- Aldi to open grocery stores next to Kohl’s – RetailWire
- Is Walmart building a tower of power with its expanding in-store pickup network? – RetailWire
- Walmart looks to automate grocery pickup – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Will services such as curbside pickup and home delivery prove popular with Aldi’s customers? Do you think Aldi will be able to maintain its low-price image while remodeling stores, upgrading its fresh product selection and adding home delivery services?
Poll
BrainTrust
Richard J. George, Ph.D.
Professor of Food Marketing, Haub School of Business, Saint Joseph's University
Bob Amster
Principal, Retail Technology Group
Offering curbside pickup and home delivery is a curious “me too” move by Aldi. Naturally some customers will want and use these services, but ultimately Aldi needs to decide if these additional services are table stakes required to compete in today’s grocery space, or costly add-ons that move it away from its low-cost market position and into the highly competitive mainstream market. I think it will be a real challenge for Aldi to maintain its low-cost image while remodeling stores and providing upgraded services. While change and evolution are important, retailers need to be careful to not chase strategies that take them too far away from their core value proposition that made them successful in the first place.
The operative word here is “pilot.” It is a good thing to test and decide. The fact that this is a pilot does not imply that customers want it; it will help determine if customers want it. It’s the way major decisions should be made.
Aldi has to keep its image moving forward and evolving. Staleness is the kiss of death. Especially as the low-price option, traffic and conversion are all the more important.
The best things in life and retail are not free. Even if Aldi charges something for its services it must balance that with its low price model. Aldi is late to the game, but that doesn’t mean they can afford to stand idly by as Walmart and all major grocery chains ramp up delivery and pickup. If delivery and pickup appeals to Walmart customers, it will have similar appeal for Aldi’s customers. The question is at what cost. The best part of this whole story is the word “pilot.” Aldi and every other retailer must fail fast enough to find the model that works for them.
Aldi risks a lot for little potential payoff with curbside pickup and home delivery. Even as a deep discounter, a sizable portion of Aldi’s revenue comes from impulse buys and the studies I’ve seen show there are fewer impulse buys online, even with recommendation engines. Besides, the primary Aldi customer is looking for bargains and even with digital promos and other marketing there still is no replacement for in-store shopper engagement.
I never want to bet against Aldi and the Albrecht family. Recall when the company entered the U.S. and was labelled the silent killer, showing up in locations with little fanfare and advertising. Currently Aldi is in the midst of a multi-billion dollar expansion and store upgrade program. The curbside pickup and home delivery are experiments that need to be undertaken to determine the financial and competitive effects of that. The biggest challenge to this effort is the potential impact on its image and positioning. If customers perceive this as simply another way to get their groceries these days, then the delivery options Aldi is testing become the ante, rather than a change in its positioning in the mind of its target market.
Curbside pickup (for the customers who want it) is no longer a “fancy amenity” but an expectation. If Aldi expects to be competitive with other food discounters like Walmart (and not just on price), it needs to offer more than a bare bones experience. This is more true than ever as Aldi moves into more upscale suburban areas. It will be worth paying attention to, to see if Aldi can maintain its pricing edge while dealing with another “cost of entry.”
It’s okay that Aldi is getting into the game of curbside pickup and home delivery. However, I see the same challenge with all grocers chasing after online shopping and delivery. The more they are successful at finding ways to keep the customers out of the stores the higher the risk will be in a few years when the stores are empty and sales are flat because they will have completely lost out on impulse buying. By then it will be too late.
That’s why it is imperative for every new convenience associated with ordering online and delivery to add some benefit that will still drive the customer into the store, even if it is only occasionally. Walmart has done that by having pick-up towers in the store. Concepts like that get customers in the store. We can’t change the minds of what customers want, but if we only focus on the short-term need without the long-term consequences, we will reach the day not too far in the distant future when many grocers may find themselves closing most if not all of their stores, if not going out of business entirely.
My daughter is a Millennial mom who has tried online/home delivery shopping but prefers to chose her own groceries. Aldi is her store of choice, not just for the selection but because of the laid back in-store experience. Her friends agree. She frequently points out how much money I could save if I shopped at Aldi instead of the upscale grocer that I prefer.
We all know that there is no reality in retailing, only perception — the customers perception. Aldi enjoys a reputation of offering high-quality foods at low prices. The stores are no-frills and most of the items on the shelves are non-branded. You have to pack your own groceries with bags you bring yourself. Want a shopping cart? It’s a quarter.
None of Aldi’s truths align with curbside pickup and delivery. This is a pilot program so who knows what will happen? But it will be interesting to see how the Aldi customer reacts.
You get the quarter back when you return the cart. It’s about not having to pay staff to wrangle carts in the parking lot.
It is interesting that Costco and Walmart and others have created expectations in customers’ minds that it’s OK to bag your own and carry your own in a discounted environment. And Aldi has been in that circle as well. What they are doing is making a positioning statement against the competition in offering a good deal, and then a good deal more in the customer’s mind. It’s a separation strategy and a good move.
Can they maintain the profit line without a price hike? They’ll find a way. Once offered, and their customers get somewhat used to it, it’s very dangerous to take away. However, I do think there will be some customers making no change at all — they do exhibit a loyalty to Aldi that is hard to break.
Aldi realized a long time ago that an ultra-low price with no added frills approach would not work all that well in the U.S. As such, it has been doing a number of things to deliver a good shopping experience alongside its low prices. This is one of those things. The danger is that this erodes margins and adds complexity, which is probably why it is a trial. However, credit to Aldi for trying and testing new things.
The popularity of curbside pickup and home-delivery is growing. It’s no longer a luxury, but an expectation for many customers. And there is no reason that Aldi shouldn’t participate. The competition is doing this. Does Walmart’s delivery and curbside or in-store pickup interfere with their low-price image? Hardly. It’s simply meeting customers’ expectations.
Consumers minimum standards for shopping are only increasing and Aldi is simply realizing they can’t sit idly by and watch this happen. It’s still a pilot so certainly, they hope to learn how well-received this will be by their core customers and if it attracts new ones. The bar is continually being raised such that even discount retailers like Aldi are forced to address the trends. Convenience is king, even at a discount price!
And today’s theme seems to be “can low cost providers offer high-cost services?” At least that’s my take on companies like Aldi (or H&M) offering costly services (and here it’s the labor cost of pulling items) and yet still maintaining their price points — and to some extent, perhaps even their image as “bargain” venues. My guess is that in the long-run the answer will be no, at least not for free. And I suspect the effect of charging the true cost for this will kill most interest in it. (Of course I could say this about much of the “everything free” online world). But little is lost in trying the idea out.
Aldi, known for its no-nonsense grocery, offering curbside pickup is an interesting move, but very logical when considering they’ve just launched grocery delivery services for ALL stores. Curbside pickup is becoming immensely popular with initiatives like Kroger’s Clicklist, Walmart Pickup, or Target’s Drive Up that have launched across a 1000+ locations. Grocers like Publix, Meijer, HEB, et. al. are also testing for impact. Companies like Curbside and Instacart are helping to fill the gap for CVS or Wegmans to offer curbside pickup when in-house solutions remain challenging.
Whether Aldi likes it or not, customers are being introduced to the service and adoption has been positive. Curbside pickup introduces a level of convenience which will continue to improve as stores become more efficient at executing. An example user’s account shows Kroger’s Clicklist still takes a phone call and 5 minute wait time at a parking lot before their pickup. So the “drive-thru” concept is not quite there yet. However, this example also shows that the Clicklist user identifies with “lower” grocery bills when using Clicklist, suggesting that it would enhance Aldi’s low-cost image.
It’s only one data point, but directional. For Aldi, the question is not about maintaining a low-price brand image, but risks of reducing margins from loss of impulse buying spend.
Aldi’s curbside pickup pilot may seem like a “me too” tactic, but in reality it’s almost unavoidable. Shoppers expectations are shaped by their experiences elsewhere. Aldi stands to lose those convenience orders to other stores if it does not offer the pickup option.
For those curbside orders, lost impulse purchases are hypothetical at best — a far smaller issue compared with competing for those transactions.
Aldi’s action stands as proof that even a highly-focused hard discounter is not immune to the consequences of online ordering. If it adds business complexity, that’s just too darned bad.
I think it’s difficult politically for stores to segment the types of services they provide by income demographic. That being said, I was just at an Aldi in Laguna Hills in Southern California, and that store was “NICE.” Much different than the stores catering to low income shoppers in Prince George’s County MD and DC where I normally shop, and nicer than the “middle income” Aldi branch in Silver Spring, Maryland in high income Montgomery County.
At the Laguna Hills store and maybe the Silver Spring store, I can see BOPIS as an important add, excepting the points others have made about the loss of impulse buying.
I once met Herbert Haft, one of the leaders of the discount retail revolution, and he said that people with money are much more focused on saving than people without it.
Aldi as shown with the Laguna Hills store, has a lot of opportunity to reach higher income demographics, especially as they improve their own brand specialty products, which are now a lot better than they used to be. (E.g., after buying Aldi tortillas once, I said never again, but their current offering is quite good; tortilla chips comparable to Mission, etc.)
I thought that Lidl might have been the company to do this, that Aldi was painted too much by its hard discount reputation. But most higher income shoppers don’t know Aldi’s previous reputation, so it doesn’t matter. And Lidl hasn’t fully figured out its sweet spot in the US, especially in terms of store locations (me, I think the opportunity is in cities and conurbations, not so much traditional suburban locations). Aldi has lots of opportunity.
I just visited one of the new Aldi stores. All I can say is they are on a positive role to take market share away from the larger retail grocers. I think more and more customers are going to like the new look and feel.