Retail Leader - May/June 2018 - 10

> GROWTH AND BUSINESS DEVELOPMENT

A focus on quality has helped Aldi win numerous awards, which
it prominently communicates in stores.

the retailer. Fewer SKUs help cut operating costs and generate faster turn.
"We pioneered a grocery model built around value,
convenience, quality and selection, and now Aldi is one of
America's favorite and fastest-growing retailers," Aldi U.S.
CEO Jason Hart is fond of saying in press releases touting
the company's expansion.
A sign of the aggressiveness of Aldi's plan to grow market
share was evident at the new Tampa location: The company
built the store in the parking lot of a new Costco warehouse.
One of Aldi's strengths that has eluded many discounters is
its ability to draw affluent shoppers (like Costco members)
despite its limited assortment. Aldi has accomplished this by
cultivating an image of a retailer focused on quality rather
than low cost.
"If you look at the cars of shoppers in an Aldi parking
lot, it's higher end cars," Ciancio said. "They are hitting the
higher end shopper more than traditional retailers realize.
They are winning on quality all over the world. They are
winning taste tests and quality tests at a remarkable pace."
Yet redesigning its store format and opening new locations are only part of Aldi's growth plan. The retailer is also
laser-focused on innovations such as contactless payments,
online grocery delivery and Big Data.

NO-FRILLS DIGITAL?
With Aldi already moving beyond its no-frills discount
roots via fancier stores and enhanced product ranges, digital
innovation is the next step along the path of evolving its
value proposition. And, like some of the changes before it,
the added cost and complexity would appear to be at odds
with the everyday-low-cost model of discounters. But like
the rest of the retail world dealing with the same operational
challenges, it's innovate or perish.
"Although they continue to drive traffic to stores, they
have partnered with Instacart," Kantar's Sheehan said.
"Which means they are evaluating the U.S. market and
acknowledging that they are going to have to compete
digitally. In terms of what they will do with online grocery,
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Retail Leader.com MAY/JUNE 2018

it's not click and collect vs. delivery vs. direct to home.
Most retailers, including Aldi, will have to offer one or two
of those options."
To wit, Aldi launched Instacart service last August
in Atlanta, Dallas and Los Angeles. Based on what Aldi
CEO Jason Hart called an "overwhelmingly positive"
response the relationship with Instacart was extended to
Aldi's 200 Chicago area stores in March.
In another major technology initiative that positions
the company to serve the preferences of future generations, Aldi rolled out contactless payments. It is a popular method of payment in Europe but has been slower to
take hold in the U.S.
Because of its growth plans, Aldi also announced an
expanded multi-year relationship with Nielsen last year
that includes integrated analytics data around shopper
panel, custom retail analytics and advertising effectiveness. The agreement makes Nielsen Aldi's preferred data
and analytics provider just as its growth necessitates
access to increasing amounts of effective shopper and
advertising data.

HOW TO COMPETE
New research from dunnhumby's Dave Ciancio is helping retailers and manufacturers understand what to
expect and how to prepare for Aldi's expansion.
"Aldi knows that consumers are shopping using a
number of lists and splitting their shop among various
retailers. Aldi recognizes this two or three-list shopping
behavior. And they want to capture the first stop shop
around the essentials, and they are getting it," Ciancio said. "They are affecting traditional retailers with
that drop in visits. They are grabbing 3% to 5% of the
sales volume from traditional retailers. And they are
particularly impacting those retailers within about one
mile of an Aldi store."
It is a key reason why Aldi along with Lidl are, according to dunnbumby's forecasts, expect to account for
a combined 10% of U.S. market share by 20121.
Aldi has certainly made a big bet on its value-priced
and tailored assortment winning over American
consumers. But as other retailers expand and enhance
their private label assortments and a growing percentage of center store categories shift online, Aldi has some
vulnerabilities that will need to be shored up.
"Aldi will need to overhaul its online offering,"
said Ryne Misso, Director of Product Marketing at
Market Track. "They could maybe sweep up a delivery
startup or another tech startup. They are also lacking
a rewards or loyalty offering. When Amazon, Walmart
and everybody else catches up to Aldi on the private
label front, they will have a big e-commerce problem
on their hands."
Aldi's strengths clearly outweigh it weakness at this
point, and to the extent the company does have vulnerabilities it has also shown itself to be an astute operator
capable of moving quickly to close competitive gaps. RL


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Table of Contents for the Digital Edition of Retail Leader - May/June 2018

Contents
Retail Leader - May/June 2018 - Cover1
Retail Leader - May/June 2018 - Cover2
Retail Leader - May/June 2018 - 3
Retail Leader - May/June 2018 - Contents
Retail Leader - May/June 2018 - 5
Retail Leader - May/June 2018 - 6
Retail Leader - May/June 2018 - 7
Retail Leader - May/June 2018 - 8
Retail Leader - May/June 2018 - 9
Retail Leader - May/June 2018 - 10
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Retail Leader - May/June 2018 - 18
Retail Leader - May/June 2018 - S1
Retail Leader - May/June 2018 - S2
Retail Leader - May/June 2018 - S3
Retail Leader - May/June 2018 - S4
Retail Leader - May/June 2018 - S5
Retail Leader - May/June 2018 - S6
Retail Leader - May/June 2018 - S7
Retail Leader - May/June 2018 - S8
Retail Leader - May/June 2018 - 19
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Retail Leader - May/June 2018 - Cover3
Retail Leader - May/June 2018 - Cover4
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