UK: Aldi’s new online grocery expansion will battle for “pole position”
Discount Retail Chain Aldi UK (part of Aldi Süd and managed by Austria Hofer) is planning to “jostle for pole position” with the UK’s largest supermarkets with its latest focus on online grocery, according to analysts.
The German discounter recently announced plans to invest a whopping £1.3 billion in to modernising its stores and distribution networks, crucially placing a major focus on its fledgling online offering. Aldi has said it plans to open 100 new stores with £1.3 billion of investment by the end of next year, as it revealed sales continued to jump higher and modernising its stores and distribution network, creating 4,000 jobs next year as part of the expansion plan, which is part of long-term plans to grow to a portfolio of 1,200 stores by 2025. The update came as Aldi reported that sales increased by 8% to £12.28 billion (US$ 15.8Bn) and pre-tax profits jump by 49% to £271.5 million (US$ 350Mn) in 2019.
After launching a click & collect trial at one of its stores in Loughborough last week marking the first time its grocery items were listed online in the UK, Aldi says it now plans to expand this to a further 15 stores.
“That will allow us to garner more information and run a really rigorous trial,” Aldi UK’s chief executive Giles Hurley said, adding that Aldi’s “unique business model and enhanced efficiency can be applied to e-commerce”.
According to Hargreaves Lansdown’s senior market investor Susannah Streeter, this could catapult Aldi into direct competition with the UK’s largest supermarkets.
“Aldi has been behind the curve on online but it’s now pivoting its model to click and collect and also trialling a delivery service with Deliveroo, both developments which will be key to sustaining its growth given the grocery shift to digital sales,” she said.
“Aldi now has an 8% share of the UK grocery market, in fifth position, just ahead of the Co-op and by making this investment into expanding its workforce, it’s clearly hoping to leapfrog Morrisons and eventually jostle for pole position against Asda, Sainsbury’s and Tesco. ’’
Publicis Sapient’s managing partner Julian Skelly added that the looming recession is likely to make Aldi’s new ecommerce proposition even more enticing for consumers.
He explained: “Aldi’s online move is a savvy one. As the recession looms likely, Aldi and other discounters are set to benefit. It is likely that many customers will switch from convenience and choice to focusing more on value for money and cost.
“With Click-and-Collect, Aldi are addressing one thing that might hold customers back from switching: the fear of going into a store. If they can create an offering that works well, customers will return.
“Aldi need to work out how to make Click-and-Collect profitable in the long-run. Initially, the focus might simply be on getting a share of the online market that they are losing to the Big 4.
“However, they will bear the extra cost of picking and packing the customers’ baskets. Aldi need to think how much, if any of this, can they pass on to the customer? Aldi need to find a way of doing this efficiently, if they are to stay true to their image of value-for-money.”