How Aldi’s move into ecommerce shows it is becoming a more ‘conventional’ grocer

Aldi is launching an ecommerce operation as it sells products online for the first time in the UK market but experts have warned that the move is both a risk and an opportunity.

Aldi

Starting with wine, in the first quarter of 2016, the German discounter will then move to list non-food items – such as electricals and clothing – from its Specialbuys range later in the year.

“Our launch online is another exciting chapter in our story and will enable us to introduce the Aldi brand and some of our bestselling, best-quality and best-value products to thousands more customers across the UK,” said Matthew Barnes, chief executive of Aldi in the UK and Ireland, of the launch.

Barnes had previously dismissed an ecommerce offering altogether. In 2014, he told Retail Week that online would “only increase our cost base” and that there were “no plans” to explore the option.

It is notoriously difficult for supermarkets to secure a ROI from ecommerce due to the high associated costs around delivery and dark store infrastructure. It took online grocer Ocado, for example, 14 years before it finally turned a profit last year.

Aldi’s u-turn isn’t surprising, according to Kantar Retail analyst Bryan Roberts. He says by not stocking food Aldi is “being smart”.

“Wine is a hero product at Aldi and its higher average transaction price and decent margins mean this will be profitable so the move makes sense,” he explained.

“There are still 47% of people in the UK who don’t have access to an Aldi so this is a good way of reaching them.”

Record sales

Aldi’s UK sales hit a record high for the 12 months to December 2014 of £6.9bn, a rise of more than 30%.

aldi
Aldi will start off selling wine online before expanding its product listings

However operating profit falling by £11m to £260m as the discounter reduced prices – to ensure it remains cheaper than the likes of Morrisons and Asda who are looking to close the gap with the German discounters – and hired more staff.

Having secured profit growth of 65% in 2013 and 124% in 2012, Julie Palmer, a partner at Begbies Traynor, called the record results “disappointing.”

She said: “They show that even Aldi can’t escape the clutches of the ongoing supermarket price war.

“But with almost half of British grocery shoppers now visiting Aldi or Lidl every month, the public still clearly loves the discounters and Aldi going online will be a major worry to the likes of Ocado, Sainsbury’s and Tesco.”

The discounter brand has committed to an aggressive plan to reach 1,000 stores in the UK but retail analyst Graham Soult believes it’s showing signs of “becoming like everyone else.”

Becoming mainstream

“Part of Aldi’s appeal is the simplicity of the business, it’s cheap and easy,” he said. “By going online it risks losing that uniqueness and becoming like everyone else with a conventional online offer.”

Soult says it would be a “mistake” for Aldi – which insists it has no plans to sell groceries online but will be “monitoring” the situation – to start selling food on its website.

This is a view shared by Roberts, who adds: “Regular ecommerce is beyond Aldi altogether. It wouldn’t be a wise move for profitability and I cannot see it happening as Aldi’s streamlined supply chain model would have to change completely.”

Soult, however, would not be surprised if the German discounter changes its stance.

He concludes: “Once it gets up to 1,000 stores, you could see Aldi become more like a Tesco to its approach online as it would make sense to provide click and collect.

“As you’ve seen with its marketing, which has gone from quiet to just about everywhere over recent years, Aldi isn’t scared to become more mainstream as it grows.”

  • Do you want to ensure your brand’s campaign gets the recognition it deserves? Enter the ecommerce category in this year’s Masters of Marketing. Go to the Masters site for details of how to enter.

Recommended

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Peter Cunningham 29 Sep 2015

    Starting with wine makes sense as it is a product that works well online and particularly in social. It is a ‘passion product’ and wine enthusiasts tend to know each other and share advice, tips and deals. Although wine is often discounted heavily in-store, wine buyers can get good value by buying in bulk and regularly online (either staying loyal to their favourite grape or switching to where the best buys are). At Buyapowa, working with Tesco Wine by the Case, we saw evidence of the power of this first hand. But once a buyer starts buying wine online it is a great opportunity to cross-sell to other products once the payment and address details are stored.

Leave a comment

Close

Discover even more as a subscriber

This article is available for subscribers only.

Sign up now for your access-all-areas pass.

If you're an existing paid print subscriber find out how to get access here.

Subscribers enjoy unlimited access to unrivalled coverage of the biggest issues in marketing, alongside practical advice from the digital experts at Econsultancy.

With a subscription to Marketing Week Premium you will get full access to:

> World-renowned columnists

> Analysis & case studies

> Exclusive leading-edge insight

> Carefully curated reports & briefings from Econsultancy

> Plus, much more including a £300 discount for the Festival of Marketing

Subscribe now

Got a question?

Contact us on +44 (0)20 7292 3703 or email customerservices@marketingweek.com

If you are looking for our Jobs site, please click here

Subscribers enjoy unlimited access to unrivalled coverage of the biggest issues in marketing, alongside practical advice from the digital experts at Econsultancy.

With a subscription to Marketing Week Premium you will get full access to:

> World-renowned columnists

> Analysis & case studies

> Exclusive leading-edge insight

> Carefully curated reports & briefings from Econsultancy

> Plus, much more including a £300 discount for the Festival of Marketing

Subscribe now