Over the past two years, if one keyword were to summarize Chinese retail, I would choose 'price.' Whether it's the rapid expansion of discount stores, the prolonged price suppression by community group buying, or even traditional supermarkets proactively lowering gross margins to survive, the entire industry is almost moving toward 'cheaper.' On the surface, this is a very intuitive reaction. Consumption is becoming more rational, demand is contracting, and using price to gain scale and traffic seems like the most direct and market-accepted approach. But if we stretch the timeline and look back from operating results, we find an increasingly obvious phenomenon: low prices are increasing, but the number of truly profitable players is not rising in tandem. Many stores have indeed seen customer traffic rise, but profits haven't kept up; some companies have expanded in scale, but operational pressure has intensified. Price has indeed brought traffic, but it hasn't simultaneously brought capability. This state of 'the cheaper, the harder' is becoming the real situation for some retail enterprises. It is against this backdrop that ALDI is about to enter the Zhejiang market. On the surface, this is just a brand's regional expansion move, but if placed within the broader industry changes, this timing and this choice carry clear signal significance. Discount is transitioning from 'whether it exists' to 'who does it better'; from price competition to systemic competition. Behind this lies a clearer watershed: some companies will gradually emerge during this phase, while others will be slowly eliminated. If we break it down from an operational perspective, we can examine three levels: why many discount stores seem to be learning but can't replicate it; why ALDI dares to enter Zhejiang at this time; and where the real difficulty of this model lies. Three Major Problems in the Discount Store Format If we only look at the surface, China's market has seen many discount store formats emerge in recent years. Many companies are also trying similar things, such as lowering prices, reducing some SKUs, and increasing the share of private label products—the path seems familiar. But the real problem is that most companies learn the actions, not the system. The first and most typical problem: they only subtract from price, not from structure. In many people's understanding, the core of a discount store is 'cheap.' But if you actually walk into an ALDI store, you'll find that the first thing it does is not lower prices, but subtract. A typical traditional supermarket has 20,000 to 30,000 SKUs per store, while ALDI typically keeps only around a thousand. The key here is not 'fewer,' but 'well-chosen.' Take one of the most intuitive categories, milk, for example, and you can clearly see the difference. In a typical supermarket, ambient milk and chilled milk are often spread across multiple brands, multiple specifications, and different functional lines, such as high-calcium, skim, organic, etc. The shelves look very rich, but the products that actually sell steadily are often just a few; the rest are in a state of 'occasionally sold, slowly accumulating.' ALDI's logic is not to make the category bigger, but to ask the reverse: which products do customers buy most often, are most likely to generate repeat purchases, and can also establish price perception? Once the answer is out, SKUs naturally shrink. The shelves look less stocked, but the complexity of the entire system also decreases. Similar situations exist in high-frequency categories like snacks and paper products. The problem with many stores is not that they don't have enough products, but that the 'extra' part is dragging down efficiency. From frontline observations, this difference becomes more apparent in the back end. Some stores have decent front-end traffic, but the warehouse is piled with slow-moving products, and employees are constantly switching between restocking, finding items, and handling discrepancies, disrupting the rhythm. It looks busy, but efficiency doesn't improve; it becomes more chaotic. SKUs are not more competitive when there are more; rather, the fewer there are, the more judgment is required. Without structural subtraction, so-called discounting easily becomes a low-margin version of a traditional supermarket. The second problem: attempting low prices without product capability. Many people think the core of discounting is price. But from an operational perspective, the more fundamental issue is pricing power. ALDI's key lies in private label. This means it doesn't just choose from existing brand systems; it directly participates in product definition. Once you can participate in product design, specification setting, and cost structure breakdown, price is no longer completely passive but can be planned. However, in the Chinese market, many discount stores still rely mainly on branded goods. Initially, this helps lower consumer cognitive barriers, but once price competition intensifies, problems gradually emerge. Because the cost structure of branded goods is controlled by the brand owners, the retail end has limited room to adjust. This leads to a common situation: prices are already very low, but profit margins are extremely thin, and once fluctuations occur, operational risks are quickly amplified. In the long run, this model is hard to sustain. True low prices are not about 'buying cheaper,' but about 'making it cheaper from the start.' Without product capability, low prices can only come from concessions, not from efficiency. The third problem: low prices amplify all operational issues. Many stores' problems are not a lack of traffic, but that when traffic arrives, the system can't handle it. In some stores, you can see employees constantly switching between restocking, checkout, finding items, and handling out-of-stocks, disrupting the flow and fragmenting the rhythm. The whole scene looks busy, but it's actually a cycle of low efficiency. Busyness does not equal efficiency; often it just magnifies problems. Low prices are essentially an amplifier; they amplify all existing problems. If the supply chain is unstable, the product structure is unreasonable, or staff training is inadequate, these issues become more pronounced under a low-price model. Why Does ALDI Dare to Enter Zhejiang at This Time? If you only look at the problems above, it's easy to conclude that this is a difficult business. But in such an environment, ALDI still chooses to expand—not out of risk-taking, but because conditions are gradually in place. First, supply chain capability can now support replication. Many people treat store expansion as the starting point of development, but in the discount model, the order is often reversed. Stores are just the result; the supply chain is the foundation. From the current layout, ALDI's supply chain capability in the East China region already has the conditions to extend to surrounding cities. This capability manifests concretely at the store level. For example, the same batch of products can be quickly rotated between different stores, the replenishment rhythm for bestsellers is relatively stable, and slow-moving products don't accumulate in one store's warehouse for long. Behind this is not just whether there is stock, but how stock flows. If the supply chain isn't ready, the more stores you open, the more problems are amplified; but once the supply chain gradually takes shape, expansion becomes relatively controllable. Whether stores can expand essentially depends on whether the system can be replicated. Second, the region has gradually connected from 'points' to a 'network.' From the layout, ALDI is centered on Shanghai, extending to Jiangsu, and then gradually expanding outward. In this structure, Zhejiang is a very critical regional node. Much of retail efficiency comes not from single points, but from scale and density. When stores are distributed in a contiguous region, many capabilities truly come into play. Delivery routes can be more concentrated, replenishment rhythms can be more stable, inventory turnover can be more balanced, and brand awareness can accumulate across cities. In practice, these changes often show up in details. Delivery vehicle routes are more concentrated, with one route covering more stores; replenishment no longer relies on ad-hoc scheduling but forms a stable rhythm; and sales performance of the same category across different cities is easier to compare and adjust quickly. If it's just a single-point layout, these advantages are hard to realize; but when 'points' connect into a 'network,' system efficiency truly emerges. Third, the market has moved from cognitive competition to efficiency competition. In the past few years, awareness of the discount format in the Chinese market has significantly increased. Whether in media discussions, the number of formats, or consumer behavior, 'value for money' has become an increasingly mainstream criterion for consumption decisions. From the store perspective, this change is very intuitive. More and more customers, when choosing products, directly compare and pick the lower-priced option among similar items, rather than relying solely on brand. Many customers also do simple comparisons in front of the shelf before making decisions. This means the market is moving from 'not understanding discounts' to 'starting to accept discounts.' Entering at this stage, companies face a completely different environment than in the early days. In the early stage, you needed to explain 'why it's cheap'; at the current stage, what matters more is 'who can run the model smoothly.' The competitive focus is shifting from building awareness to efficiency and capability. The Real Difficulty Is Not Low Prices but Replication If we put all these factors together, they point to a more core issue: can this model be continuously replicated across different regions? Many people use 'model' to describe ALDI, but if you look deeper, you'll find it's more like a highly consistent system. The difficulty is not whether one or two stores do well, but that most stores can maintain a similar standard. From a store operations perspective, this is very difficult. Because once you scale, differences between store managers, employees, and trade areas will continuously amplify. Without a sufficiently stable system, these differences will quickly affect results. It's not hard to do one store well; the hard part is making ten or twenty stores all perform similarly. What ALDI is truly good at is taking 'similar' to the extreme. Another common problem is learning only part of the system. Many discount stores are indeed learning from ALDI, such as reducing SKUs, increasing private label share, and emphasizing low-price strategies. But the problem is that these actions are often executed separately, not as a whole system. For example, reducing SKUs without synchronously optimizing the supply chain; or increasing private label without stable product quality; or lowering prices without improving store efficiency. This 'half system' might work in the short term, but once it enters the scale stage, structural problems are likely to emerge. As a result, it looks similar on the surface, but the outcomes are completely different. Learning half is actually more dangerous than not learning at all, because it makes problems more hidden and harder to adjust. The third key point is expansion itself. After seeing the discount model, many companies instinctively accelerate their expansion pace. But from a system perspective, expansion is actually an amplifier. It amplifies all existing problems. If the system is not yet stable, the faster the expansion, the sooner problems surface. Supply chain not keeping up, inconsistent product standards, unstable staff training—these issues may not be obvious at the single-store stage, but after regional expansion, they become systemic risks. Being able to enter a market is capability; being able to replicate stably across different markets is the barrier.
Final Thoughts
If we pull the entire logic up a level, we can see a clearer trend: the discount track is entering the second half. From the initial 'is there an opportunity,' to 'who expands faster,' to now 'who can run the system steadily.' ALDI's entry into Zhejiang is not just an expansion move; it's more like an industry signal. Discount is transitioning from price competition to systemic competition. In the long run, those that survive may not be the cheapest, but those that can still operate stably under low prices. Because true capability is never about price, but about running an entire system smoothly over the long term. Low price is the threshold; the system is the ticket.