Aldi Quietly Enters New York City
While Wal-Mart and Target boast of plans to open smaller stores
to squeeze their way into U.S. cities, one of their likely competitors is already
there: Aldi.
An article in The New York Times fairly marveled at how
Aldi has in recent years sneakily established a foothold in many cities —
including a location that opened in February in Queens, NY with a second one
in the city planned for the Bronx later this year. The entry comes despite
being non-union, one of the largest retailers worldwide, and foreign to boot.
But much of the
article largely served as an introduction to the German-based limited-assortment
grocer, which now counts more than 1,000 stores across the country. After opening
its first store in 1976, its growth has accelerated in recent years to between
80 to 100 stores annually.
The stores — ranging from 10,000 to 17,000
square feet — carry about 1,500 of the most popular grocery items. About 95
percent of the mix is private label. It also has many quirks largely to keep
prices low, including charging a quarter to get a shopping cart with a refund
upon cart return. It also has no butcher or bakery, sells fruit by the
bag to speed checkout, and it doesn’t advertise.
The low-prices are expected to make
Aldi most appealing to city dwellers. The company claims its discounts are
up to 45 percent off competitors, although analysts told the Times the
discounts are probably closer to 20 percent on average.
The Times article still
wondered whether the limited assortments and dearth of national brands would
work in cities.
A query on consumerist.com exploring the Aldi concept
received more positive than negative comments.
Said one, “I’ve gotten
better food at Aldi’s than I have at the grocery store my husband works at,
and that’s saying a lot. I’ve had some of the best apples, bananas, oranges
from there. Granted they don’t get fancy, but I don’t need an organically grown
piece of fruit to get what I need in my diet.”
Another wrote, “We
buy lots of fresh produce, a small amount of meat, some fresh and high quality
dairy items, etc… Aldi just doesn’t have the kind of products we buy, and
the ones they have that we do use aren’t that great. I think if you buy lots
of canned and prepackaged stuff, it’s a good place to go to save some cash.”
- Where Wal-Mart Failed, Aldi Succeeds – The New York Times
- Is Aldi Just Trader Joe’s Without The Marketing Budget? – consumerist.com
- NYC unfairly biased against Wal-Mart? – New York Metro
- Retail Forecast: Walmart Versus Aldi or Battle of the Grocery Titans – Gerson
Lehrman Group - Aldi expansion will reach into N.Y.C. – The Packer
- Aldi to open Medford store this summer – Boston Business Journal
Discussion Questions
Discussion Questions: What do you think of Aldi’s growth potential in cities? How do you expect Aldi to fare against smaller concepts being developed by Wal-Mart and others?
Aldi’s limited assortment, small store footprint, and low prices work very well during any economy. In a tough economy, where we are about to see gas prices hit $5.00/gal., and we are watching CPG companies increase their prices by high single-digit percentages, Aldi will be seen as a godsend for many.
Their urban strategy is sound, and their entree into city stores, whether it is New York, Chicago, or LA will be a major win for Aldi, and will shift some of the food dollars that Walmart and Target are trying so hard to capture.
Aldi has cleverly expanded “under the radar screen,” compared to its corporate cousin Trader Joe’s as well as larger-footprint retailers. Its ability to provide edited assortments of value-priced groceries has moved the brand well beyond its roots as a “budget” alternative to traditional grocers. If Aldi can find the sort of location that works for its free-standing stores, there is a world of opportunity in high-density urban locations.
Large urban markets hold huge potential for Aldi. Their tight focus on an edited mix and space flexibility looks to make them a nimble and scalable competitor. This is a highly fragmented market ready for price competition. The trick will be localizing the assortments and shopping experience. This should set them apart from the bigger players. Big potential.
This is the perfect time for Aldi to expand in cities, particularly in the under-served areas. Their combination of food necessities and low prices are suited to the current mindset of shoppers. Additionally the city neighborhoods have great potential for sales in any economy. There is a void for basic food choices that Aldi can fill in many city neighborhoods.
I doubt that Walmart will do very well against Aldi with a small format. If Walmart can’t beat Aldi on price with a large store, how can they do it with a small one? Aldi is just too sharp on their labor and efficiencies. Aldi loves Walmart and loves being in their parking lot. Aldi uses Walmart as muscle to draw traffic to their stores. Aldi might carry 1500 items throughout the year but I don’t think they do at any one time. My pricing checks show Aldi about 35% below conventional competitors and about 20% below Walmart.
Quality is similar to the the premium private labels of other supermarkets. Some stores try to compete by using a lower quality private label, but it’s just not as good as Aldi and still higher priced.
Aldi does advertise. Sometimes heavily on TV, circulars, and newspapers. As for growth in urban areas, Aldi is already there and doing well. Vertical cities like New York are new to them and their growth will be probably be limited. However, with the collapse of A&P there could be a lot of space coming available. Aldi will need to adapt to life in the big city using smaller trucks, double parking issues, perhaps higher rents.
Aldi’s urban store size and limited assortment reminds me more of a superette than a supermarket. That being said, given the food deserts in many major metropolitan areas, the distance the people who live there have to travel to buy food and their low price strategy Aldi’s should be very successful.
It is ironic that in 2011 we are still talking about Aldi’s ability to “sneakily establish a foothold in many cities.” Aldi has always been referred to as the “silent killer,” an appropriate descriptor, but one only needs to develop a chronology of their activities to understand their strategy–limited assortment (1500 SKUs), low prices, low overhead, and no advertising expenses. It never pretends to be something that it is not.
Aldi still will maintain many of the above-noted competitive advantages when Walmart and other retailers with smaller boxes enter the marketplace.
As an aside, the Albrecht family has done a terrific job of differentiating two great food retailing concepts: Aldi and Trader Joe’s. Each chain’s positioning is clear, distinct, and desirable. Something that many of the chains with their 50,000+ SKUs cannot claim in their positioning.
Any proposition in which the consumer value is clear, articulated and absolute will succeed in breaking through the noise and that rule will apply whether you’re Aldi or Apple. The key is staying out of an ever-widening middle where shopper value becomes nebulous.
Provided Aldi stays focused and clear, they’ll take their fair share of the urban markets they opt to play in.
Aldi currently has the most broadly viable model for inner city locations. Size, selection and price are all on their side in all but the most upscale locations. The bigger question is who will really challenge them–Walmart? Dollar stores? Walgreens?
Aldi has a leg up on the other two because they are use to conforming to very small footprints in cities from the international footprint. They do execute efficiently and will give both a run for their money. Especially since the word about Aldi’s quality products is spreading.
As a marketing person (and an Aldi customer), I continue to be impressed with the savings made and the high quality of the products private-branded. In high-cost New York City, they should do well, and with their small store size, find lots of good locations.
Mr. Sessel and Mr. Ball have it about right. However, to answer Mr. Ball’s question; probably no one will challenge them. No one has been paying attention to Aldi. No matter where they go, how many stores they gain, they simply remain ignored. They are probably hoping it stays that way. They have so far.
While arrogance stands in the way of clear eyes of what’s happening right in front of our eyes, Aldi continues to grow. They’re unchallenged by any one doing anything like they are doing–at lease effectively. Quiet, unique and successful–all while no one was looking.
Aldi may face many similar challenges as Walmart Express should it choose to open stores in mid-town Manhattan. But Rego Park, Queens is a brilliant choice–still urban, but more of a bedroom community for the multi-ethnic working class.
Aldi won’t need the magnetic aura of a nearby Walmart to draw traffic to its location. It’s located near the intersection of Queens Blvd. and the Long Island Expressway–heavily populated and accessible to foot, subway and even automobile traffic.
I can visualize dozens of potential Aldi locations with similar traits across the five boroughs, in neighborhoods that would embrace the choice. Aldi’s positioning and operating formula are well-refined, which gives it a major head start over Walmart or any other large chain that needs to finish inventing its concept prior to roll-out.
Aldi’s merchandising approach to grocery is effective in an increasingly price-conscious society. I have seen their stores for some time in Western New York and they have now entered Florida.
Including Aldi on your shopping list means that, as a consumer, you probably have to make two stops, one at your “core” grocer and a second stop at Aldi to buy the price–advantaged items they specialize in.
As long as consumers are willing to split their basket for savings, Aldi will make headway. It stands to reason that the perceived advantage on Aldi prices has to be large enough to dictate this behavior by consumers.
One thing I have learned about Aldi is if they don’t sell it, I don’t need it. The only time I would ever go to another supermarket is to cherry pick a few specials. I’m probably one of the few people that does 90% of their shopping at Aldi. Aldi knows people will cross shop and they love being new high volume, more expensive supermarkets.
Don’t expect Aldi to come in and be a savior to food deserts. Aldi is not a charity so don’t expect them to put employee’s lives at risk. I’ve seen them close stores in the dangerous parts of Milwaukee, Toledo, and Chicago. I think for Aldi to be successful they need to be in the shadow of high volume competitors, not the lone duck in a retail desert.
Retailers want to be in cities because that is where customers are. The issue is how to do it. Large stores are just too expensive to build. Smaller formats are needed if oil stays above $100 a barrel, as consumers want stores close. Also as the population ages, seniors may not drive or want to shop a 250,000 square foot store. This is important as the current trend is senior moving into cities.
Aldi will do well against the competition. Most competitors have high prices and poor perishables. On the other side, offering only 1,500 items will limit their customer base. Longer term, another business model will be required to fully service the inner city consumer. It will carry 25,000 items coupled with a unique delivery system, all at suburban prices.
Full disclosure – I LOVE ALDI. As long as you are prepared to (a) buy what they want to sell rather than counting on them to have everything you need, (b) checkout FAST i.e. everything on the belt then back in the cart to be packed after paying at a separate counter designed for the purpose, (c) stand in the one and only open checkout lane until someone decides to open a second one and (d) pay with either cash or debit card then you are onto a winner and should be able to get quite a few good value, good quality products and even quite a few downright surprise bargains.
In England they advertise in the form of emailed newsletters with their twice-weekly special offers. EVERY week they have 6 extremely low-priced fruits and vegetables (most pre-bagged). Other items such as cleaning products, canned goods and many dairy items are extremely good quality at extremely low prices.
What I don’t buy and (perhaps irrationally) feel reluctant to try are meat, poultry and frozen prepared foods. But then I tend to get the two former direct from producers or reliable butchers and never use the latter.
Oh yes, they don’t believe in beautifully tempting merchandising so if this matters then it may not be your cup of tea.
Growth potential for American urban locations? I would say purty durn good. I think they will be welcomed with open arms and many people, once tried, will become loyal customers (even if they still have to make a second trip for some of their usual favourites). And their special purchase bargains simply cannot be beaten.
I have a friend who lives in Queens, and she says of all types of retailers in the area, “If they can’t deliver it 24/7, I don’t buy it.” That’s simply the culture there, and I wonder if Aldi has embraced it and is prepared to embrace other unique urban cultures in their expansion plans.
Aldi store 999 was open outside of Pittsburgh, where my elderly Mom lives on March 23, 2009. Her life and those of 50,000 shoppers in the 3 mile radius changed forever.
It is a beautiful store with high ceilings, sky lights, bright interior, beautiful produce stacked high, great refrigerated and frozen selections, and a center store with about 1500 items, all discounted at least 20 percent lower than the other guys, with the same or higher quality.
Be it tundra liquid bleach, or savoritz crackers, or L’oven fresh bakery items, Aldi rocks in quality and savings.
It is a footprint that caters to the shopper who doesn’t need to walk a zillion miles of aisles just to buy a head of lettuce, a gallon of milk, and a dozen of eggs. It really reminds me of a neighborhood A&P in the late 1950s. Highest quality, lowest prices, that’s the Aldi promise.
Aldi will be a strong competitor to most American food markets. They are smart, taking a long-term view of the challenges and opportunities, rather than rushing into areas for ego-gains. There is a reason they are so dominant.
Aldi has expanded in this Midwestern county from one older store in a low income area of town to ten stores in adjacent neighborhoods and cities with higher income levels. Produce and basics are their strong suit. Price, size of store and selection of basics draws folks back to the grocer.
I still shop at Giant Eagle and Heinens but try my best to avoid the Walmart super centers. Giant Eagle selection is appealing but the size of the store limits shopping ease for career professional buyers. Walmart is depressing with very limited mix not to mention lacking in customer service.
Unlike Aldi’s cousin Trader Joe’s, much of the Aldi inventory is still imported. Canned foods are made in China which TJ’s has stopped carrying.
I find Aldi to be a time saver but improvement of Aldi’s service level as customers check out would undoubtedly increase their bottom line when one spots the buyers’ abandoned, product-filled carts adjacent to this area.
I think Aldi will do well there. New York may be an expensive city, but it is one with masses of low-income people who are poorly served at basically rip off prices by the incumbents.
Aldi is not much of a threat to the truly high-end grocery retailers in NYC, such as Fairway’s, Zabar’s, Dean & Deluca, Citarella, Elis and so on. Those players will compete among themselves. However, Aldi does pose a huge threat to New York’s many mediocre mid- and low-end supermarkets. The likes of Gristedes, Associated, Morton Williams, Pathmark and so on have for years enjoyed rich pickings operating in what are basically overpriced “food deserts” in working class sections of the city. Aldi will provide these people with a convenient choice to do low priced stock-up shopping and it is likely to be a huge hit at that.