Aldi will launch in China a week from now, opening the first of 11 stores initially planned for Shanghai.
But the Aldi China store format will be considerably different to the German discount grocer’s shops in the other 11 offshore markets it has entered: sources in Germany report the stores will have a more upmarket feel, stocking cosmetics and a broader range of dairy products.
The stores will carry the signature brand positioning line “Everyday value – hand picked for you”.
The location of the first two stores are in “noticeably prosperous neighbourhoods,” reports Lebensmittel Zeitung.
The first Aldi China store opens on Friday June 7, and has been described by Aldi insiders as “more modern than company stores in Europe”. They will stock shelf-stable goods imported from Europe and Australia and fresh produce sourced locally.
Nick Miles, head of Asia-Pacific at IGD, said that while Aldi Sud (South) has been testing the Chinese market for some time, having launched on Alibaba’s Tmall Global platform in April 2017, China will be “a new challenge” for the discount retailer.
“Aldi currently operates stores in Europe, Australia and North America. Trading in Asia, and particularly China, will be very different. Many international retailers have entered this market over the past 20 years and not succeeded, while discount is a grocery channel that doesn’t currently exist in China – or Asia – in any meaningful way. Discounter Dia sold its business in China in April last year, while Lidl has recently pulled back from selling products via online platforms in the market,” said Miles.
Lebensmittel Zeitung reports that Aldi Sud has been working on a plan to enter China through its thriving Australian subsidiary. “The growing business contacts between these two countries mean that the no-frills retailer can also draw on Australian suppliers with considerable experience in exporting to China.”
Miles, meanwhile, predicts a significant challenge for Aldi will be overcoming potential resistance to its own-label lines.
“Brands are king in China, while Aldi relies heavily on its private-label ranges.”
Another challenge is that online grocery retailing and digital technology in retail are “exploding in the market” while Aldi’s business model has traditionally been through physical stores.
“Aldi will be aware of all these challenges and more but plans to position its stores so that they appeal to China’s rapidly growing middle class and their desire for high-quality, imported products. It has ambitions to open 50-100 stores in the medium term and will be aware to not spread its operations too wide – a mistake other retailers have made in the past.”
Choosing Shanghai to launch Aldi China makes sense because of the city’s population of more than 30 million, the sophisticated supply-chain infrastructure in the city and the local population’s relatively higher level of income compared with other Chinese cities. It is also a major global logistics hub.
Meanwhile, IGD forecasts China to overtake the US and become the world’s largest grocery market by 2023.
“The opportunity for Aldi to be present in the market is therefore clearly significant, but it will not come without its risks,” added Miles.