Discounts Down Under

In Australia, Aldi Upends Rivals With No-Frills Stores, Low Prices

A fair dinkum discount! Source: AP
A fair dinkum discount!
  • Why it matters

    Why it matters

    Australia’s supermarket sector was long dominated by two players, but Aldi is hoping to expand across the country and build on its success.

  • Facts

    Facts

    • Aldi only entered the Australian market in 2001, but already has 350 stores.
    • The discount chain’s minimalist offerings have gone over well with Australian consumers.
    • Shoppers can even find Haribo gummy bears at the same place where they are kept in German stores.
  • Audio

    Audio

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The German discount supermarket chain Aldi recently received some rare negative press in Australia.

The company neglected to tell consumers at the checkout that there was a 0.5 percent surcharge for credit card purchases, complained the Australian Securities and Investments Commission (ASIC).

Aldi got off lightly – with a reprimand that it must pledge to inform its customers both better and earlier.

But managers at Aldi Australia will hardly lose sleep over the matter. The company is a rising star in the Australian food retailing business. The discount chain is even planning to expand from the heavily-populated eastern coast to the more sparsely populated western and southern parts of the country.

The German company only came to Australian shores in 2001, but since then has built a network of 350 stores. It has been directly challenging market leaders Woolworths and Coles, which together control about 90 percent of the about 85 billion Australian dollar (€59.4 billion) supermarket sector.

If Aldi’s expansion continues at the same pace, the company could increase its sales in Australia from A$5.3 billion to A$9.3 billion, according to a recent study. “Aldi’s entrance into Australia has been an overwhelming success,”said UBS analyst Ben Gilbert.

Entering an Aldi store in Australia, one is immediately reminded of the stripped down, no-frills branches in Germany. The layout, colors, and advertisements, everything looks familiar. The products are often German and Haribo gummy bears can even be found in each store on the first shelf, on the bottom left, just like in Germany.

Customers in Australia have complained, however, about long waits at the checkout and the lack of better quality fresh products.

The chain’s minimalistic concept has been a recipe for success in Australia. While Woolworths and Coles have up to 25,000 products on their shelves, in Aldi there are only a couple of hundred. The offerings are supplemented by weekly special items such as vacuum cleaners, ski jackets and sets of pots and pans. Everything is brand-name quality, but at a substantially lower price.

Customers in Australia have complained, however, about long waits at the checkout and the lack of better quality fresh products. The company is working on solutions to these problems, according to Aldi in Sydney. The chain has considerably expanded its offerings of fresh bread and meat in the past few years. According to UBS, Aldi is now attracting more wealthier customers than before, and they have higher standards.

When possible, the company gets its products from local Australian producers. Many of these have indicated to Handelsblatt that they are generally satisfied with their dealings with Aldi buyers, which hasn’t always been the case in Germany.

“Contrary to both of the large companies, Aldi adheres to a set price,”said one vegetable seller. The producer said the company is also uncompromising with its insistence on quality and guaranteed delivery times.

In the past few years, Woolworths and Coles have reacted to the growing influence of the discount rival by increasing offerings of their own inexpensive brands. But a typical basket of items at the two large companies is still up to 50 percent more expensive than at Aldi.

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