What we can learn from Aldi & Lidl?
The growth of Aldi and Lidl has been the single most important dynamic in the grocery industry in the last ten years. If you thought this narrative had all but played out, when Aldi and Lidl both lost share during the lockdowns, you need to think again. The share loss was due to circumstances very specific to lockdown (especially shielders feeling compelled to shop online). In the latest Kantar data, both Aldi and Lidl achieved their highest ever share, and they are once again growing ahead of the market. The whole industry is rightly focussing a lot of effort on what to do about it.
So what can we learn from Aldi and Lidl?
There is one overriding learning. Know what you are good at and keep doing it better and better.
As observers, we may get a bit bored of this story. We know how it works. A relentless store opening program, cheaper retail sites, a very efficient way of working at the centre and in stores. Procurement on a massive scale and simpler ranging to drive cost effectiveness. Minimal distraction online and very fresh food because of the speed of stock turn. The result? Decent quality and great price.
We get bored but shoppers do not. They just keep lapping up decent quality and great price. The fact it doesn’t change is a good thing. Aldi and Lidl have the discipline not to play with the toy. They will make tweaks. Aldi are looking to catch up with Lidl on in store bakery. Both have done great things with premium own label to keep the more aspirational shopper interested. But they have not and will not compromise the core of their proposition.
And this spells a major problem for those who compete with Aldi and Lidl. Because ultimately this is a BRAND thing.
Aldi and Lidl have consistently delivered on their core proposition over many years. Shoppers trust those brands to deliver on quality and price.
Lots of prices are changing in all retailers in this inflationary situation. The majority of shoppers will not know the detail of price comparisons on every item, but they have learnt through experience over the years that Aldi and Lidl are going to be giving them great (and probably the best) quality for price. Tesco and Sainsbury’s can say what they like about price matching. Asda and Morrison’s can say what they like about cuts and freezes. Even if they were able to match the actual quality and price offered by Aldi, across every product, they would still have a problem. It would take many years to build up the trusted value that Aldi have. Because shoppers quite rightly put a greater premium on what they have experienced than on what Retailers say in their marketing.
What is the answer for those competing with Aldi and Lidl? It’s the same principle - know what you are good at, and keep it doing it better and better. Can Sainsbury’s be as cheap as Aldi, in the minds of most shoppers? No. Can it convince us that its food is better? Yes. Can Tesco be as cheap as Aldi? Again, probably no. Can it be more helpful? Yes. Can Morrisons’ be cheaper? No. Can it have better fresh (Market Street)? Yes.
It’s about choosing a game you can win. If you’re playing Aldi and Lidl at price, you can’t win. Know what you are good at and keep doing it better and better.
Jeremy Garlick is a Partner of Insight Traction, consulting with FMCG and Retail companies. He was formerly Head of Insight at Sainsbury’s, Waitrose and Premier Foods.