August 17, 2012

German discounter-supermarket hybrid

Aldi North's latest German store concept in Castrop-Rauxel (photo: Georg Lukas)
Big moderniser: Aldi North's new, enlarged store concept in Castrop-Rauxel
Germans who shop at discounters such as Aldi or Lidl are increasingly confronted with stores that look like building sites.

The leading no-frills retailers are not only competing with rivals Netto Markendiscount, Penny, Norma, and Netto Supermarkt. They are also trying to regain the ground lost to supermarkets over the past few years.

German supermarkets have generally become more assertive on prices, introduced new assortments, and spruced up their stores. “Save yourself a trip to the discounter” could be their new motto.

Meanwhile, Germany’s 15,660 discount stores have virtually saturated the market in terms of sites. Market researcher Trade Dimensions confirms that only 21 outlets have been opened since March on a net basis. This is by far the lowest opening rate for years. So what now?

Major revamp

Total sales surface areas are not set to decrease, however. Instead, we are witnessing a huge wave of investment in the modernisation, extension, and replacement of older and smaller stores.

Although German discount stores still average only slightly more than 800m², Aldi Nord (Aldi North), Aldi Süd (Aldi South), and Lidl are opening outlets of 1,000-1,200m² wherever planning permission allows.

This not only increases pressure on rivals with smaller stores, such as Netto, Penny and Norma, but also on smaller supermarket operators. The latter must quickly differentiate themselves or die.

Furthermore, hard discounters have generally been moving conceptually towards supermarkets. Aldi’s recent decision to list more brands is just one expression of this phenomenon.

More Fruit & Veg

Discounters are increasingly modifying former EDLP policies and using special offers to present customers with exclusive products which can’t be found at the supermarkets. For example, they run so-called “Länderwochen” (country weeks) to promote national specialities.

Discounters have also grown their F&V and convenience assortments, and nearly all of them now sell fresh bread and bakery products. Lidl’s scratch bakeries already carry more than 30 lines.

As supermarkets become more price-aggressive and discounters operate larger stores with wider assortments, store channel profiles are becoming increasingly blurred.

German consumers could be forgiven for asking: “Am I in a discount-oriented supermarket or a supermarket-oriented discounter?”

Related article in German: Lebensmittel Zeitung, no. 33, 17.08.2012, by Hans-Jürgen Schulz


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