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China: Aldi's China Offline Expansion

Updated: Jan 24

Discount Retail Chain Aldi China has set its sights on expanding its presence in China, despite the challenges posed by the COVID-19 pandemic and China's hard-line approach to "zero COVID". Aldi has announced plans to open 500 to 600 stores in Shanghai this year alone, and has already brought 27 stores to the city over the past three years, with each expected to generate an annual sale of 20 million RMB ($2.92 million). Aldi has integrated 11 of the existing stores into shopping malls, with the remaining 13 located in residential neighbourhoods with high foot traffic. Aldi's offline expansion is based on its prior success in the digital space, where it has been operating with e-commerce at the core of its business model.

Despite the challenges confronting Aldi's offline expansion plans in China, the discount retailer has demonstrated its ambition to tap into the world's largest consumer market and play a big role in shaping China's retail industry. The ongoing pandemic and a 0.3% year-on-year decrease in retail sales of urban consumer goods in the first seven months of 2022 posed challenges for Aldi, but the company remains committed to its China ambitions, planning to install 500 to 600 stores in Shanghai alone. Eyebrows may be raised in the face of Aldi's China ambition, but the company appears to remain unfazed.

Aldi embarked on its foray into the Chinese market in 2017 through Alibaba's Tmall Global, a leading cross-border e-commerce platform in China, which allowed them to reach out to Chinese consumers looking for imported goods. The next year, Aldi launched its own online flagship store and later on landed on WeChat and other major Chinese retail and food delivery service platforms such as Meituan and Eleme, further paving the way for its offline expansion. Aldi's strategy in the digital space has been successful, with online platforms remaining the company's primary source of sales and playing a crucial role in its offline expansion plans in China.

Aldi has managed to win over middle-class consumers in China by introducing a low-price, "discount retailer" strategy, allowing them to compete with other local and foreign retail giants in the market. This is made possible by selling mostly private label products, with over 90% of its offerings being items produced under Aldi's own brand names. This gives Aldi better control over the entire production process while avoiding additional costs associated with third-party production. Furthermore, Aldi has recently introduced a low-bar loyalty membership concept that is free of charge. This allows a more accessible membership concept to the public, with special services provided based on the accumulated purchase points.

Aldi's strategies in digital and offline expansion seem to be paying off in China, with the company continuously gaining more recognition from the Chinese market. Despite being a late entrant, Aldi has outperformed other global labels during the industry downturn and established itself as a reliable name in China's retail industry. Moreover, as online grocery shopping became more common during the pandemic, Aldi's digital ecosystem and top-notch supply chain system have allowed the company to stand out in the market. With a low-price strategy synonymous with affordability, Aldi can now increase its competitiveness, ensuring that it remains a valuable contender in the ever-growing Chinese consumer market.

In conclusion, Aldi's future growth prospects in China remain positive, particularly with its strong online presence and successful offline expansion efforts in the mainland. Continuous adaptations will be required to maintain a sustainable expansion, however, as China's market dynamics and consumer demands continue to evolve. As a late entrant to China's retail industry, Aldi has shown its potential to compete with existing giants in the market, but it remains to be seen how the company will adapt to shifting market trends in the future. Nevertheless, Aldi's current and future strategies will undoubtedly shape the country's retail landscape and inspire other companies to follow suit.


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