Despite a boom in growth at Aldi, when it seemed that the middle classes had heeded articles in the Sunday quality press about the bargains to be found at deep discounters, it has failed to make the significant impact that was predicted at the start of the recession.
Aldi's growth for the 12 weeks to the end of December 2008 was up 25.4% year on year, but according to TNS Worldpanel this slowed to 8.1% in the 12 weeks to 9 August. TNS attributes this to curious shoppers failing to be converted to regular loyal customers.
The data also shows that Asda and Morrisons are out-growing Aldi in market share. Like-for-like figures show that in the 12 weeks to 10 August, Aldi grew its share from 2.9% to 3.0%, while Asda's share grew from 16.7% to 17.2%, indicating that the expansion and promotion of supermarket value ranges has thwarted the discounters' low-cost proposition.
Nonetheless, Aldi is embarking on an expansion programme, and aims to triple its current total of 500 stores. However, the departure of UK and Ireland managing director Paul Foley last month indicates some internal upheaval. The introduction to its ads of celebrity chef Phil Vickery a year ago, to position it as an upmarket discounter, also indicates a split brand personality.
What can Aldi do to keep customers? We asked Martin Nieri, managing director of CMW, which handles Marks & Spencer's direct marketing account, and Jo Kenrick, former marketing director at B&Q and now business director for the Asda account at Fallon.
Martin Nieri managing director, CMW
Public panic when the banks collapsed, and blanket media coverage of the recession, had an incredible effect on consumer behaviour. Shoppers suddenly felt they had to save money and altered their behaviour immediately, the beneficiaries of which were the likes of Aldi, Lidl and Iceland. These budget retailers fitted in with the new mood of frugality, as ‘pinching the pennies' became the new ‘splashing the cash'.
Then two things happened: first, consumers didn't like what they saw (witness the number of semi-sneering articles on Poundland and other budget retailers in the press); second, the big boys quickly adapted and squashed any price advantage the budget chains might have had, slowing their growth.
We like our brands to have personality; we like to trust them and know what we are getting. Aldi has made some moves to rectify this, but is still known for promising low cost on brands we haven't heard of. Shopping there is a risk for consumers, and one they won't always be willing to take.
- Accept that most customers won't shop at Aldi for everything and use that to the best advantage.
- Focus on what the store does best - quality store-cupboard basics - to attract a different kind of loyal shopper.
- Put greater focus on the quality of the produce. Push the link with Phil Vickery: he's a personality punters can trust and shows that value doesn't come at the expense of quality.
- Forge links with the local community. Sponsor local sports teams and leagues, and be innovative: rather than just putting the Aldi name on shirts, sponsor the food at a local derby match or Bonfire Night event.
Jo Kenrick business director for Asda account, Fallon
I have always been absolutely sure where Aldi sits in the world of retail - its brand identity is crystal clear and consistent through every element of the retail mix. How it talks to its customers, the location and size of the stores, their look and feel inside and out, even down to the car parks and the service experience, stack up to an unashamed focus on the lowest prices around.
So the advent of a global recession and real panic about how to make ends meet among a much bigger proportion of society provided the perfect environment for Aldi to flourish - as indeed it has.
However, having done such a great job of establishing the brand's fame for one thing, I don't believe you can then change it to stand for something else overnight, or even over the course of a couple of years. Aldi's fortunes seem inextricably linked to the level of economic fear in the UK population as a whole, despite its laudable efforts to capitalise on the current situation by adding a quality message to its existing value credentials.
- The business' growth rate is impressive, but that does not mean it can rely on continuing economic uncertainty to drive customer loyalty.
- Take steps to significantly expand the brand's footprint in customers' minds and emotions or risk continuing to be a top-up shop for cheap items.
- Create a broader home-delivery range to satisfy consumers' main grocery shop requirements.
- Diversify further by offering ‘Aldi value' on non-grocery products. The company seems to be trying this strategy through its website, but this has low general visibility.