1-yuan purified water, 3.9-yuan sanitary pads, 8.9-yuan 950ml milk, 9.9-yuan shampoo, 9.9-yuan per liter grape juice, and even 9.9-yuan liquor. Can you believe these are the prices at a Shanghai supermarket in 2024? Indeed, many Shanghai consumers have recently been won over by a German supermarket, affectionately called "Poor Ghost Paradise" by Shanghai drifters—Aldi. This supermarket did not follow the trend of competing in bustling CBD areas but cleverly chose residential areas and university towns as its foothold, becoming an indispensable "outlet" in every Shanghai community. Inside Aldi, products are neatly arranged and beautifully packaged, yet prices are exceptionally affordable. This perfect combination of high quality and low price gives Aldi a strong contrast, making it stand out quickly in the market.

Source: Wenhui Net

As a German supermarket, Aldi has been in the Chinese market for only four years, yet it has already opened 54 stores in Shanghai thanks to its unique business model and precise market positioning. So, in a market crowded with discount supermarkets, how does Aldi stand out with its unique business approach? And how does it win the favor of savvy Shanghai consumers?

Four Reasons Consumers Love Aldi

First and foremost, Aldi is cheap enough and has no membership fees. "The first time I saw Aldi's prices, I was stunned," said Xiao Liu, a Shanghai drifter for three years, to the author. "Aldi is a paradise for working people; everything is cheaper than the general market." On social platforms like Xiaohongshu, many consumers share the same feeling: "Aldi's facial cleanser is so cheap I don't feel bad using it on my husband's face" and "Aldi has brought down the price of sanitary pads."

Source: Xiaohongshu @忽若風吹塵

Compared to Sam's Club and Costco, which require membership fees, Aldi's strategy of "no membership needed" is undoubtedly more attractive. "Just for the no-membership-fee point, it leaves Sam's Club in the dust," Xiao Liu said. Aldi has become her favorite supermarket.

Second, Aldi provides thoughtful service, giving consumers a full sense of emotional value and satisfaction. The staff's smiling service, neatly arranged products, and pet-friendly policy all make people feel at home. At 6:30 PM, Aldi's discount time begins, with discounts increasing as time goes on. Tuesday member days offer even more deals, with double points and spend-based discounts. Aldi also uses a discount system similar to metro card cumulative discounts, making consumers feel the satisfaction of "getting a bargain."

Third, there's the unique Aldi Kitchen, offering a rich selection of ready-to-eat hot meals, baked goods, desserts, and light meals. There are as many as 60-70 types of ready-to-eat hot meals, dazzling customers with options like Shanghai fried noodles, vanilla red-braised roast chicken, and Shaanxi cold noodles. Office workers and nearby residents treat Aldi as their canteen.

Source: Wenhui Net

Working professional Xiao Liu admits that Aldi has taken over her lunch. "It's cleaner and more hygienic than pre-made dishes. A light meal or 'white people food' can be done within 20 yuan, and no queuing needed." Data shows that Aldi's ready-to-eat products can account for up to one-third of total store sales.

Finally, Aldi keeps up with the times in marketing. They are adept at using social media and public places like subway stations for advertising, attracting consumers with humor. Examples include subway station recruitment ads, giant cabbages, milk-themed buses, unconventional apple concerts, and co-branded events with Xue Yi, all bringing smiles and showcasing Aldi's humor and creativity. Of course, Aldi also loves to tease competitors. In one copy, Aldi wrote, "Do you need a membership to buy good meat? I don't understand and can't learn from a hundred years of never charging membership fees," clearly dissing membership-based supermarkets. Another line: "Exaggerated! The neighbor's Swiss rolls expired before they were finished! Luckily, Aldi's small packages mean buying more or less is always cheap!" implying their smaller portions. Netizens exclaim, "So funny!" "Aldi's mental state is just like mine," "Absolutely ridiculous," "Another bizarre business tactic added"... Every consumer seems to have some quirky reason to like Aldi. Some like the product portions—small enough for singles without worrying about leftovers; some enjoy eating a sandwich at Aldi while charging their phone, feeling relaxed; some like that Aldi is closer to home, just a turn away after work, avoiding a one-hour traffic jam to Sam's or Costco...

Source: Shangguan News

In short, Aldi has firmly captured the hearts of today's youth with high quality, low prices, good service, and entertaining marketing strategies.

Minimalism: Aldi's Success Secret

Aldi, a brand born during the Great Depression, has successfully opened over 10,000 retail stores in more than 10 countries by precisely capturing consumers' desire to save money. In the German market, Aldi even defeated retail giant Walmart in 2006 with its high cost-performance ratio. In 2017, Aldi entered the Chinese market and, within a few years, opened 56 stores in Shanghai and elsewhere. In today's competitive discount store market, Aldi has not been affected but has won consumer favor with its unique operating strategy. So, what exactly does Aldi rely on to survive?

First, Aldi follows the principle of minimalism, maintaining an average of about 2,000 SKUs per store, only one-tenth of the industry level. This strategy of carefully selected SKUs helps reduce procurement costs, stabilize supplier cooperation, increase turnover speed, and ensure efficient inventory management. Data shows that Aldi's single-item turnover speed can reach five times that of Walmart. Of these, about 1,500 are daily necessities, while the rest are seasonal and holiday items limited by season or festival, meeting diverse consumer needs while staying streamlined.

Second, Aldi builds a vertical supply chain to lower retail prices while ensuring product quality control. This vertically integrated supply chain model allows Aldi to maintain strict selection and quality control supervision throughout the entire process of product development, production, and operation, ensuring high quality. For example, Youbai Dairy's high-quality, low-price strategy is based on Aldi's strong supply chain system. This milk has received consumer praise, with many calling it "the conscience of the industry" and "a price that ordinary people can afford to drink every day." In each category, Aldi focuses on a few products to meet 80%-90% of consumer needs and scenarios.

Source: Shangguan News

Third, Aldi emphasizes the development of private-label brands. It searches globally for quality producers and does OEM production according to first-class quality, reducing brand premiums. In Chinese stores, except for leading brands, all products are private-label, with private-label products accounting for over 70% of items; in some countries, this ratio reaches 90%-95%.

Minimalism, vertical supply chain, and private labels are Aldi's three core competencies, helping it achieve a balance of stable quality, low price, and convenience, creating value and advantages. Of course, Aldi's mature model has also inspired many domestic newcomers. For example, Hema's hard discount format, Hema Outlets, after realizing the importance of streamlining SKUs, removed about 64% of SKUs and increased the share of private labels, aligning with international discount stores. Currently, Hema Outlets has opened over 60 new stores in Shanghai, more than Aldi, and continues to expand. Additionally, the first Dingdong Outlets store recently opened in Shanghai, positioned as a hard discount supermarket, and this market is expected to become even more crowded.

Not only discount supermarkets, but brands are also seeking breakthroughs in price wars. This summer, packaged water, sugar-free tea, and other products have seen price cuts. Nongfu Spring's purified water is now less than 1 yuan per bottle, sugar-free tea prices have moved from 5-6 yuan per bottle to 3-4 yuan, with some breaking the 3-yuan price point. More and more consumers are focusing on good quality and low prices, seeking cost-performance or "quality-price ratio." NielsenIQ's "2023 China Consumer Insights and 2024 Outlook" report shows that 43% of respondents will strictly control overall spending, and 37% will change consumption habits to seek the best price or lower-priced products. Not only workers but also the middle class have joined the trend of finding alternatives. The Post-90s Research Institute's "2023 Youth Money-Saving Report" shows that even new middle class with decent incomes have joined the "stingy camp." A popular term recently is "middle-class poverty": although the middle class has money, their living costs are high—housing, cars, nannies, travel, education—so they save where they can. Aldi happens to meet the middle class's pursuit of extreme quality-price ratio under the "refined frugality" consumption psychology.

Although Aldi is often jokingly called "Poor Ghost Paradise," its core user group does not simply define it as synonymous with "poor." Consumers love Aldi because it achieves a perfect balance between quality of life and spending levels. After all, the imported boutique supermarket decoration style, the prominent ALDI English logo, the easy access to various light meals, baked goods, and red wine, combined with affordable prices, is a winning combination.

PK Pangdonglai: Can Aldi Win?

When it comes to retail supermarkets, many think of Pangdonglai, a regional supermarket in Henan known as the "ceiling of service" and the "Haidilao of retail," which quickly became famous in the past year. What are the similarities and differences between Aldi and Pangdonglai? Let's compare these two brands and other popular retail supermarkets from key dimensions such as positioning, number of stores, private-label share, and SKU count.

First, the similarities: both are positioned as boutique supermarkets, primarily with private-label products. Pangdonglai's private-label products account for 80%, while Aldi's exceed 70%. Second, both have a small scale and concentrated retail areas: Pangdonglai is only in Henan, while Aldi's stores are all in Shanghai. Third, in store layout, Pangdonglai, like Aldi, has bakery and deli sections.

The difference is that Pangdonglai has a richer SKU selection and is more humanistic, reflected not only in high employee salaries, benefits, and short working hours but also in meticulous care for customers. For example, they brush snow off customers, provide raincoats, and offer services like peelers and anti-cold gloves.

Source: WeChat Official Account @超市设计策划

But Aldi lacks this aspect, as higher rent and labor costs in first-tier cities make it difficult to cover everything. So, will Aldi have the opportunity to replicate nationwide in the future? The answer is not necessarily.

First, unlike membership-based supermarkets like Costco, Aldi does not rely on membership fees but mainly profits from product sales. This places higher demands on cost control. Shanghai consumers, educated by membership supermarkets like Sam's and Costco, have high acceptance of boutique supermarkets, strong spending power, and high foot traffic. However, once stepping out of Shanghai's comfort zone, facing different regional spending capabilities, ensuring profit becomes a huge challenge. Compared to first-tier cities, second- and third-tier cities have cheaper land and labor costs but also place more emphasis on regionality and cultural attributes. For example, Pangdonglai has firmly captured the hearts of consumers in Xuchang and Xinxiang with its people-oriented philosophy and strong human touch. Aldi faces significant challenges to catch up.

Second, competition in the hard discount supermarket sector is fierce. Currently, there are many players in the domestic hard discount supermarket space, such as Hema Outlets under Hema, Dingdong Outlets launched by Dingdong Maicai, and Qingmei Member Discount Stores, all accelerating expansion.

Source: Business Observer

Especially Hema Outlets, which has already opened over 60 stores in Shanghai, more than Aldi. Most of Hema Outlets' similar products are priced similarly to Aldi, and some fresh products are even cheaper. Additionally, with the rising trend of buying domestic brands, domestic Hema Outlets is more favored than foreign Aldi. Not only hard discount supermarkets, but domestic community retail formats are far more developed than in Europe and the US. Japanese convenience stores, local convenience stores, community fresh food stores, and community group buying are all competitors for Aldi.

As early as 2022, Aldi set an ambitious goal of opening 500-600 stores in Shanghai. But currently, only 54 have been opened, falling short of expectations. Expanding beyond Shanghai seems even more complex. Bold store expansion and rapid growth require substantial financial support, and if the capital chain breaks, the entire expansion plan could stall or even collapse, which is why previous player Biyide died. In the author's view, Aldi's cautious approach to store expansion is a wise choice, as slow and steady is safer than rushing.

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