ALDI supermarkets have been recognised within Australia to be giving the big duopoly a run for their money recently. The price competitiveness of this overseas company has lured customers away from larger stores such as Coles and Woolworths. However, ALDI has always been known as a budget store and its presentation sometimes reflects that. Products are practically carted off the lorry and left sitting on the shop floor upon the pallets they were initially packed onto. This gave the brand a really rustic but cheap feel.
Now though it seems ALDI want to start moving up the ranks potentially to join the boxing ring with the bigger boys. ALDI has launched a new trial upmarket styled store across certain areas of Australia to try to lure larger income shoppers. These stores are only trial stores but it shows the intentions that ALDI have. It’s trying to steal customers from the “middle market” who might usually shop at Coles and Woolworths.
This news isn’t just about ALDI moving up market, I believe it’s much bigger than that. Only last week I posted a similar blog post about Woolworths who had experienced terrible Q1 financial profits and as a result decided to improve and adopt an ALDI styled own brand line of products. I think what we as customers are witnessing is a monumental battle among the supermarket brands and a potentially large shift in power. ALDI moves upmarket to new territory, whilst Woolies does the same but moving downmarket.
Whereas historically ALDI has been branded as the low budget store, internal research from the company has suggested that customers from higher income postcodes have been increasing yearly. To support this claim ALDI Australia released a statement derived from a Nielsen Homescan report that 30% of their customers in 2014 travelled from low-income postcodes. The report classified these customers as those who earned below $45,000 per household.
$90,000 per household or above was classified as a high-income residence and the report revealed a growth rate of 6.7% within this customer base since 2011. To put this into perspective, this is the highest growth rate compared to any Australian supermarket chain.
Overall, 64.3% of customers were from either low (30%) or middle (34.3%) income households with the remaining 65.7% coming higher salary households. This strongly shows a majority growth within this higher bracket of ALDI customers.
If you would like to check out one of these newly designed trail stores then head down to either Kallangur, Queensland, Chisholm in the ACT, McGraths Hill in NSW or Highton in Victoria. The new layout differs from the old stores as mentioned earlier, fresh fruit and veg have been brought to the front along with meat, dairy and freshly baked produce. This new shift is store layout and the improved product displays, lighting and checkouts have all been implemented to continue attracting higher income households.
All of these efforts in focusing their stores around the shoppers experience and improving customer service have not gone unnoticed. ALDI for the third time in four years has been awarded the Canstar Blue’s Most Satisfied Customers Award. There are a few trends that lead to a supermarket being awarded this title such as:
- The most common reason for loyalty is related to customers being familiar with the stores layout. (66% agree)
- Loyalty directly correlates to proximity of household and supermarket (53%)
- Reward points were another shared satisfaction that kept customers coming back to their preferred supermarket. (53%)
- A third of customers also agreed that they preferred the products that their supermarket stocked compared to competitors
The positivity within ALDI Australia has encouraged the brand to expand its gourmet range from 25 lines to 65, a direct response to popularity.
Since 2001, ALDI has opened 367 stores across Australia and with them has captured 11.4% of the grocery market. This large growth within the industry has caused the big stores such as Coles and Woolies to focus more on their own-branded items to become more competitive. Professor Graeme Samuel, former chairman of the Australian Competition & Consumer Commission from 2003 to 2011, revealed that an inquiry into the grocery industry in 2008 saw prices within Coles and Woolies stores were cheaper whenever there was an ALDI store within close proximity.
One other complimenting issue that has encouraged growth within ALDI stores has been the removal of restricting covenants by Coles and Woolworth’s supermarkets. The covenants were imposed by the big duopoly to restrict new supermarkets from opening within shopping centres.
As customers I believe we are witnessing only the beginning of a huge price war between the two long-standing titans of the grocery market (Coles and Woolworths) vs the new underdog ALDI. Similar to this Masters vs Bunnings price battle, the result will only encourage stores to more competitively price their products to try and keep shareholders happy and customers flowing through their stores.