German discounter Aldi has said it is examining market conditions for a launch in China at present, but nothing has been decided yet.
The retailer confirmed a German press report in Manager Magazin that quoted from notes of the Aldi Company Committee, which discusses common strategic topics for Aldi Süd and sister Aldi Nord. Traditionally the two companies have divided their foreign markets between one another.
Moving to China would add a fourth continent to Aldi’s network, after Europe, America and Australia. Focusing on an emerging market such as China is a first for the 100-year-old grocer.
The move is understood to be part of the wider strategy change at the world’s leading discount store operator. That includes opening up to a more supermarket-like way of thinking, such as launching range extensions and TV spots, as well as a management reshuffle that will see joint UK managing director Roman Heini return to Germany from the UK.
China is a possible expansion option not only because of its size and growth outlook, but also its business-friendly government and credible fight against corruption. As a conservative, family trust-owned retailer, Aldi places particular emphasis on a stable and reliable environment. The business tends to think in decades rather than years – a fact that more than once has made life hard for listed competitors, most recently in the UK.
China’s long-term outlook
China’s general conditions and long-term outlook, with higher single-digit growth in real terms, still look promising. Labour costs are also on the rise, which is a positive for Aldi because high staff productivity is an important advantage for discounters.
It is likely that Aldi will first enter the large conurbations where per capita spending is several times higher than the national average. However, in China, discounters still have not yet taken off. The largest is domestic retailer Shanghai Nonggongshang’s 5 Yuan fascia, followed by Spanish grocer Dia (formerly part of Carrefour). Discount stores so far have been unable to make themselves stand out from the competition.
But the biggest challenge will be how Chinese consumers will react to Aldi’s private label-focused ranges. Importing Aldi’s ranges could also prove costly.
Should Aldi really go ahead with its plans, Planet Retail does not expect it to start operations in China before 2018 at the earliest.
Matthias Queck, research director, Planet Retail
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