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Why Aldi’s ‘premium store’ trials won’t translate for UK consumers

Aldi has been trialling premium store formats in Australia, which have seen in-store bakeries, better lighting, new categories such as food-to-go and organic food and a focus on improving how products are displayed as well checkout wait times.

However, introducing them to the UK consumer could prove risky for the brand which has built its proposition on being a no-frills retailer where saving made in avoiding large ‘posh’ stores are put into giving shoppers low-cost goods,

The move in Australia comes after Aldi found that only 30 per cent of its customers in the country are considered ‘low-income’. Nearly 35 per cent are ‘middle-income’ while a further 35 per cent of shoppers come from household with an income greater than $90,000 a year — up 6.7 per cent since 2011.

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According to The Australian, the new store formats have already boosted sales and improved store visits. So could Aldi be readying its ‘posh’ stores for the UK? It’s unlikely to happen any time in the near future, according to a spokesperson for the brand.

Aldi has been in the Australian market for 14 years and has quickly captured nearly nine per cent market share to become the third-largest food retailer in Australia. Its main competitors are Coles and Woolworths.

It has taken longer to crack the UK market. Having entered in 1990, it currently sits behind its larger ‘Big Four’ rivals – Tesco, Asda, Sainsbury’s, Morrisons – as well as the Co-op as the sixth largest grocery retailer commanding a 5.4 per cent share of the market.

“After many years of trying, it currently has the right formula, which is successfully attracting shoppers from across the spectrum,” said Alastair Lockhart, insight director at in-store marketing specialists Savvy.

“With that in mind it seems unlikely that Aldi would trial premium store formats in the UK - certainly not in the near future. Its stores are performing well and it still lacks geographic coverage in many parts of the country. Simply by opening new stores, it can pretty much guarantee market share gains.”

However, Aldi's impressive growth is beginning to plateau and it has already been trying to ‘premium-ise’ its offering in existing stores. For example, its Speciality range touts goods like wagyu beef, manuka honey and Italian extra-virgin olive oil to lure more middle-income shoppers through its doors.

Chris Averill, chief executive of customer experience agency We Are Experience said Aldi’s in-store experience is already the best among UK grocers; it knows customers want quality produce at a reduced price and gives it to them.  

“I wonder whether a new upmarket look could get in the way of that. The consumer expects a simple yet functional store from Aldi,” he said. “Its USP is founded on offering a no-nonsense shopping experience, distancing itself from the smoke and mirrors of stores such as Sainsbury’s and Waitrose. I question whether shoppers will feel that Aldi is changing, becoming similar to its bigger rivals.”

It wouldn’t be the first value-led retailer to attempt to upgrade. Last year, Morrisons revamped a number of its stores introducing innovations like ‘mist machines’ to highlight its fresh produce.

However, critics felt that by giving the impression of being an upmarket retailer, Morrisons was driving consumers to no-frills discounters like Aldi. Earlier this year, the revamp strategy was halted and its mist machines axed.

Averill continued: “The most important question is will an upmarket look give Aldi the power it needs to start taking on competitors such as Sainsbury’s and Waitrose? I wouldn’t like to say for certain but it’s certainly happened before. Some 20 years ago Woolworths was at the height of its growth and Poundland was the cheaper, smaller competitor, but the second Woolworths started to falter Poundland snuck in and took over the majority of its stores.

“Now there’s a Poundland on every high-street and Woolworths has gone bust. Whether Aldi’s growth will be quite as dramatic remains to be seen but with the big name supermarkets in retreat it certainly stands a chance.” 

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