March 15, 2018

Aldi talks online in China

Aldi China online (photo: screenshot)
Aldi celebrates the Chinese New Year
The Year of the Dog could be a lucky one for Aldi South in China. Germany's most profitable discounter went online there only last April. But that's a long time in cyberspace, and Aldi seems to have used it well. The low-profile retail giant does not publish sales figures or customer numbers, but numerous indicators point to rapid growth in the People's Republic.

Staff count at the Shanghai-based operation has already passed 100 and is growing rapidly; the highly-curated and keenly-priced offering on Alibaba B2C platform Tmall Global has nearly doubled to 200 lines; and cooperation has been extended with this local colossus to Tmall Classic, China's largest online marketplace.

Of course the question burning in everyone's mind is whether Aldi sees this distant e-commerce adventure as a prelude to opening physical stores in the Middle Kingdom. We are convinced that Aldi is not on a slow boat to China and that a start will be made within the next two or three years, probably in Shanghai.

We also understand that they are looking for local management and beefing up their expansion team. So we asked country manager Christoph Schwaiger...

His answer during a video interview on WeChat came with the very slightest suggestion of a smile. Despite Schwaiger's best efforts to remain inscrutable it was as though he couldn't resist thinking of such a vast market with the promise of dynamic growth for decades to come.

He also knows that Aldi doesn't have any major competitor in the discount arena – yet.

If Aldi does follow Carrefour and Metro C&C into China, it would be embarking on the most ambitious project in its corporate history.

This is particularly remarkable when one remembers that the privately-run company is also expanding at the fastest clip in its 42-year history in the US, has just entered Italy, and is modernising its store base throughout Europe.

Aldi's approach to complex foreign markets could also provide a blueprint for other international retailers: First enter a new country online, hone your assortment to local tastes, and then set up shop.

"Bringing the world
on a plate to China"

Aldi China CEO Christoph Schwaiger (photo: Aldi)
Aldi Süd
Christoph Schwaiger: Aldi's man in China
Herr Schwaiger, Aldi went cyber in China on April 25 last year, what was your own personal highlight since then?
It was great to participate for the very first time in the many shopping festivals the Chinese celebrate. Of course the most well-known one is Double Eleven or Singles' Days, but there are many others such as the Wine Festival or Mid-Year Shopping Festival.

People from the West can best imagine it if they think of having Christmas, Easter and Whitsun several times a year.

You extended your cooperation with Alibaba at the end of January and now also sell via their Tmall Classic platform. What extra advantages does this give you? 
Tmall Classic is a cross-border e-commerce platform subject to a number of restrictions. Tmall Global gives us unlimited access to Chinese customers for the first time. It has been extremely revealing to find out whether we were marketing the right products and to know what local consumers like or don't like so much.

You kicked off with 100 own label products. What product categories have you added since?
We now have 200 products. An assortment is, of course, a living organism. We have added skin and body care, including such products as shower gels, as well as household care products, including washing powder and fabric softeners.

We have also launched some entirely new lines such as apple cider vinegar or 'pancake shake'. The latter comes from Australia and is sold in small bottles, you add milk or water, shake the bottle, and get really delicious pancakes in only two minutes.

Do you also sell baby food and fresh produce?
We have a few products for children, such as breakfast cereals, cookies and snacks. But baby food and fresh produce aren't a big priority because their handling is complex and logistics costs are relatively high.

What products interest Chinese customers the most?

Aldi China online shop advertising (source: Aldi China)
Aldi China
Aldi China: Online shop advertising
Snacks are a really big category. At first we sold nuts in the same way we do in Germany, namely, roasted, unsalted and with no sugar. But we have since learned that taste is really important to the Chinese. So we now coat our cashew, macadamia and pecan nuts with honey or other additional flavour components.

Will you continue to grow your assortment this year?

Our in-house motto is: 'Bring the World on a Plate to China'. We currently import food from our businesses in Australia and Austria, but our group is in many countries, so this could be extended. That said, our aim is to make our assortment more relevant to our customers rather than to go for mass.

Have you deleted any categories?

We have excluded baking ingredients because this category is not as mature as in Europe.

Who are your main customers?
We are aiming at all online customers who want to buy quality and competitively-priced food from abroad. Obviously we are targeting families who value food security.

We are also aiming at young consumers who have fun with new and innovative products. Apple cider vinegar, for example, isn't used for dressing salads, as in Germany, but as a dietary supplement.

We also attract those customers who associate positive things with imported products. Last but not least, one shouldn't underestimate the many Chinese who have either worked or been a tourist in Germany and who want to buy German products.

German drugstore giant Rossmann wants to cooperate with Alibaba in order to draw even more Chinese tourists into its stores. Couldn't Aldi copy that?
Obviously this is something very specific to Rossmann or its competitor dm. Whether in China, South Korea or Japan, there are many Asian customers who are not particularly impressed by local skincare products and who want to buy authentic ones from abroad.

Our focus, however, is simply to build the business in China. We want to offer local consumers products which they would not normally be able to buy so easily in China.

You said just now that you no longer import products exclusively from Australia?

Screenshot Aldi China online
Aldi China online (source: screenshot)
Most of our products still come from Australia. But we started importing goods such as chocolate, biscuits and sweets from our Austrian subsidiary, Hofer, as from the second week in December. We also have a chocolate factory in Austria. One of our big goals for 2018 is to expand our international sourcing. After all, Aldi isn't only in continental Europe, it is also in the USA and the UK.

Of course, we must first consider which products best suit the market and then have a long, hard look at the logistics costs involved, as a lot of these products would have to be shipped around the world. So we are still analysing the idea.

Many retailers who work with Tmall complain about the high fees, which bite into their margins. They also claim that Tmall makes hefty demands for rebates and aggressive prices. This is obviously not everyone's cup of tea. What has it been like working with them?

Aldi China (caricature: Oli Sebel)
Enter the dragon: Sorry, you've seen this before, but just couldn't resist it (caricature: Oliver Sebel)
We are very happy with the partnership and continue to regard Tmall as the destination if you want to enter the Chinese market. Obviously we prepared our arrival well in advance and with the utmost care, but we were both new to China and had never entered a market with just e-commerce.

Tmall helps us to hone our assortment and to develop the business, and we look forward to continuing our cooperation with them.

How quickly can you deliver to customer homes in China?
We deliver our whole assortment throughout China. If you order by 4 p.m. in an urban conurbation, we will deliver to your door the next day. But, as we are a cross-border merchant, delivery times will depend on the customs authorities. If they decide to take samples, this can delay delivery by up to two days.

This is why our logistics team is working on speeding things up.

Will you continue to use Cainiao Logistics to find local delivery companies for you, or have you since found an exclusive partner?
We continue to work with Cainiao and are both happy with their services and thankful for their support.

We've saved the best question till last: When do you intend to open physical stores in China?
Currently we are focussing on developing what we already have. We only launched our web shop a year ago. The most important thing is to implement what we have learned and to offer an assortment which really meets consumer needs. We also want to make online shopping both smart and simple.

That's the only thing we are breaking our heads about at the moment.

Lebensmittel Zeitung with digital sister (photo: LZ)
photo: LZ
Our German retail B2B newspaper, Lebensmittel Zeitung, in print & digital
Read in German: 'Aldi plant Filialen in China' by Hans Jürgen Schulz, Hendrik Varnholt, Manuela Ohs & Mike Dawson on page 1 of Lebensmittel Zeitung, no. 10, 09.03.2018; and 'Aldi Süd baut das Online-Geschäft in China aus' by Mike Dawson & Hans Jürgen Schulz on page 12 of Lebensmittel Zeitung, no. 11, 16.03.2018 

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