Kaufland nearly down under
The Schwarz Group subsidiary and Lidl sister company has confirmed that a feasibility study on market entry has "already made considerable progress" but refrains from giving a specific starting date.
The low-profile retail giant, with 1,230 compact hypermarkets in Germany and six Central & Eastern European countries, needn't be so coy, however. An increasing number of its top brass have been seen returning from Australia with a suntan of late, and we are happy to reveal that the corporate HQ will be in Melbourne.
A glance at Kaufland Australia's new website (www.kaufland.com.au) confirms that they are already actively recruiting for a "letting manager". The company is also searching for locations with a minimum plot of 10,000m² and a preferred size of 15,000m² to 20,000m², including 200 to 300 parking spaces. Want to know more?
But the gradual transition of the Ozzie economy from mining to services has left some citizens feeling vulnerable. "Consumer sentiment is fragile due to high-profile job cuts and company collapses, weak wage rises, and years of political instability," says Madeleine Heffernan, Business Reporter at Fairfax Media. This will only make shoppers more appreciative of the savings to be made at a discounter.
Nice to meet you again, Aldi*
Kaufland will doubtless also profit from the pioneering work of Aldi South who arrived Down Under in 1991. The arch-rival has created a network of 458 stores and posted gross sales last year of around €5bn, according to estimates by market research company PlanetRetail. Aldi Stores says it plans to open 25 outlets a year on the eastern seaboard and 120 more across South and Western Australia longer-term.
Research by UBS analyst Ben Gilbert would indicate very much more ambitious plans, however. As Aldi continues to reinvest all profits in local operations, store density could reach one outlet per 20,000 inhabitants, which would mean a national network of around 1,150 outlets.
Estimates at UBS would indicate that price competition from Aldi Stores and US warehouse club operator Costco have halved net margins at Woolworths and Coles over recent years to around 3 or 4 per cent. Meanwhile, Aldi, with an estimated net margin of 5.2 per cent, has become one of Australia's most profitable retailers. This juicy margin will surely be challenged when Kaufland arrives.
OTC makes for a headache
Last but not least, national demographics are in Kaufland's favour. Australia may be a vast continent, but nearly two-thirds of its 23 million inhabitants are concentrated in its five largest cities (Sydney, Melbourne, Brisbane, Perth and Adelaide). One should also not forget that both Sydney and Melbourne are larger than Berlin.
Given the size and lucrative nature of the Australian OTC market, it would only seem logical for local chemists to block the entry of a potential competitor. However, this issue now seems to have been resolved.
In a statement made to Ms Heffernan, Kaufland wrote yesterday: "We have entered into an agreement with the Australian Pharmacy Guild. This is why their activities have no impact on our schedule or expansion in Australia. It is our understanding that we will be receiving our trademark rights any time soon."
So why has the mighty lobby backed down? We understand that Crocodile Dundee and his mates turned up at guild headquarters one morning and made it plain that they would not stand for any ban on Kaufland: After a night on the town, our hero demanded the right to buy both aspirin and Alka-Seltzer at a reasonable price...
* By the way, one of our newspaper's delightful secretaries, Natalie Lohrengel, has just come back from holiday in Oz with an Aldi "Special Buys" brochure in her handbag. Aldi brochures are always well done, but one particularly impressive idea in this one is the "Aldi Testers Club". Customers are invited to "Tell us what you think" by joining aldi.com.au/testersclub
The company describes the procedure as follows: "We send you free products to test; You write an honest review; We listen to your feedback to make our products even better." What a cool idea!
Podcast. Click arrow to listen to an audio version of the text: