May 29, 2019

Aldi gets physical in China

Aldi Shanghai at Jingan Sports & Fitness Center (photo: LZ Archiv)
Upmarket location: Aldi is celebrating its debut in China as a tenant at the Jingan Sports & Fitness Center
In only days from now Aldi will be starting business in the People's Republic of China. The German discount giant's first store will open in Shanghai on June 7. According to information obtained by Lebensmittel Zeitung, a further nine outlets will follow there soon. The first two sites, one of which includes a tenancy in the Jingan Sports & Fitness Center, are in noticeably prosperous neighbourhoods.

Although Aldi is said to want to proceed cautiously during the pilot phase, our newspaper expects the medium-term store count to reach 50 to 100 in order to obtain the necessary economies of scale. Persons who claim to be familiar with the concept describe it as "more modern than company stores in Europe".

Under the slogan 'Everyday value – Handpicked for you', the global discount pioneer will be offering a considerably more upmarket proposition than at any of its other nine foreign operations. The convenience-oriented assortment will apparently feature many import goods from Europe, including the dairy products and cosmetics much loved by Chinese consumers.

This represents a major departure from long-established company practice. The move is also counter-intuitive as the Chinese are also known for their frugality.

It was doubtless inspired by insights into local customer preferences gained from the online shop established by Aldi on Alibaba's e-commerce platform in April 2017. To date, China is the first country Aldi has ever entered without any physical stores.

Insiders also maintain that fruit & vegetables will be supplied by local producers, which is certainly credible from a logistics standpoint.

Aldi's maiden store in Shanghai (photo: LZ Archiv)
The first of 70,000 stores in China?
Aldi store front in Shanghai (photo: LZ Archiv)
Aldi in Chinese: Its maiden store in Shanghai
An initial indication that Aldi China, run by CEO Christoph Schwaiger, wanted to do more than just dip its toe into local cyberspace was seen last autumn when the low-profile retailer quietly increased headquarter staff in Shanghai.

Aldi Süd (Aldi South) is said to have become increasingly interested in entering the vast Chinese market through its thriving subsidiary in Australia. The growing business contacts between these two countries mean that the no-frills retailer can also draw on Australian suppliers with considerable experience in exporting to China.

The decision to expand in Shanghai is clearly motivated by the sheer purchasing power of its 30 million highly aspirational and upwardly-mobile inhabitants. The historic metropolis is also a major global logistics hub easily accessible by both sea and air.

The potential for Aldi in the Middle Kingdom is obviously vast. Economists expect the country to overtake the US as the world's largest grocery market within the next five years. And, if Aldi ever gained the same level of penetration in China as it already enjoys in Germany, then the company would have a network of 70,000 stores!

Meanwhile, archrival Lidl has obviously shied away from the People's Republic. Plans to set up an online shop of its own in summer 2017 were first put on hold and then quietly dropped earlier this year. Now does one call that wisdom or lost opportunity?


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Read in German: "Aldi eröffnet erste Filiale in China" by Mathias Himberg, Jens Holst & Hans Jürgen Schulz on page 6 of Lebensmittel Zeitung, no. 22, 31.05.2019.


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