Aldi, which has opened 62 stores in Shanghai, officially announced its upcoming expansion beyond the city through a recruitment notice titled "New Stores in Two Cities Opening Together, Suzhou and Wuxi Are Waiting for You!" The store expansion in Suzhou and Wuxi can be seen as part of its efforts to deepen its presence in the domestic market and further promote its business layout in the Yangtze River Delta region.

The author previously focused on analyzing the differences between German ALDI and Chinese Aldi; the former has become the world's best 'poor man's supermarket' due to its 'hard discount' model, while the latter, upon entering Shanghai in 2019, targeted the middle class, transforming into an 'imported community boutique supermarket' with a 'soft discount' style.

It wasn't until the second half of 2023, facing the overwhelming wave of discounting, that local players with accumulated supply chain and store resources such as Hema, Dingdong, Yonghui, Wumart, and Jiajiayue all underwent discount reforms, and Aldi also attempted to embrace ALDI's 'hard discount' logic again.

Aldi positions itself as a leader in global affordable supermarkets and a pioneer of the private label model. So, amid the retail industry's various formats all competing on 'product strength,' what unique aspects does Aldi have in its localization approach? From cautious expansion to officially announcing its departure from Shanghai, how many chips does it hold?

Repositioning, Instead 'Upgrading'

In fact, Aldi's ability to change its brand positioning from 'boutique supermarket' to 'affordable community supermarket' is mainly based on localization adaptations made in response to the domestic market environment.

The so-called 'adaptation' refers to 'adapting to the trend.' When Aldi first entered China, it coincided with the '100 million new middle class' becoming the 'hot commodity' for retail enterprises. Seizing the moment, Aldi chose to elevate its status, opening stores in communities to meet the middle class's demand for quality products in community boutique supermarkets.

Operating community supermarkets in expensive areas of Shanghai ultimately requires considering cost issues, which is why industry insiders at the time doubted the sustainability of Aldi's model. However, from a current perspective, we can conclude that in the early stages of entering Shanghai, Aldi was more concerned with brand penetration than survival challenges.

As for why it focused on the middle class, the deeper reason is that at that time, Aldi had not yet formed an absolute supply chain and price advantage in China.

ALDI's expansion into overseas markets relies on the halo of being the world's best 'poor man's supermarket,' but local and foreign markets have different survival conditions. With only five years of presence in Shanghai, Aldi, regardless of store scale, brand awareness, or local supply chain strength, finds it difficult to compete with retail enterprises deeply rooted in Shanghai like Hema and Dingdong Maicai. Even with global supply chain capabilities, due to higher procurement and transportation costs, 'removing a series of unnecessary costs' domestically is not an overnight task.

This is also the underlying reason why Aldi initially shifted to 'soft discount' in China.

Now, Aldi, which frequently increases marketing efforts, has a further thirst for revenue growth. Especially after entering 2023, 'quality-price ratio' has become a new consumption trend. Leading retail players like Hema have all turned to discounting, building vertical supply chains and other upstream actions to 'squeeze water' across the entire chain, continuously lowering terminal prices.

At this point, for Aldi to gain a firm foothold in Shanghai and even turn profitable, it must adjust its strategy.

Returning to the value-for-money track, Aldi has shifted from a 'middle-class paradise' to an 'affordable supermarket,' which is actually a continuation of the entire group's globalization strategy.

Recent research has found that at the user perception level, 'hard discount' is often easily confused with cheap stores in consumers' minds. But cleverly, Aldi, which has already subtly shaped a high-end image, now labeling itself with 'hard discount' actually makes cost-conscious Shanghai residents view it as a new choice for consumption upgrading.

Returning to Low Prices with 'Private Labels'

Based on global market layout, ALDI's basic approach when entering a new market is: first, thoroughly penetrate and cover a regional market, and with sufficient patience and time, solidify the local product supply chain.

Currently, Aldi's approach of starting from Shanghai and extending to the Jiangsu, Zhejiang, and Shanghai regions follows this logic.

In the view of industry insiders, it is wise for Aldi to accelerate its layout pace in China and expand stores in the Jiangsu, Zhejiang, and Shanghai regions, but the more critical challenge is localization.

'Success in Shanghai may not be replicable in other cities; you need to deeply understand the local market to gain a foothold, otherwise you'll suffer from acclimatization like Amazon.'

Localization adaptation is Aldi's 'solution' during the rooting phase in the domestic market, but past paths no longer apply to the present. Under the 'quality-price ratio' trend, sticking to 'boutique supermarket' will only put Aldi in a position of regression if it doesn't advance.

How to remain invincible?

After much deliberation, Aldi played the 'private label' card, cooperating with local suppliers to develop private label products, controlling prices and costs from the production end, and launching multiple private label product lines including the 'Super Value' series, covering fresh produce, bakery, snacks, daily chemicals, and other daily necessities.

So we see that since this summer, Aldi has launched the 'Always New Low Prices' campaign. In its private label Super Value series, many products are priced below 10 yuan, including 9.9 yuan liquor, facial cleanser, and lemon tea, and 3.9 yuan sanitary pads, which have sparked widespread discussion on social platforms.

Regarding continuous price cuts, Aldi has stated externally that it has been committed to reducing its own operating costs, optimizing processes at all links, and striving for maximum efficiency. At the same time, it is rooted in the local market, building a strong supply chain system to further reduce costs and improve efficiency.

But it is worth noting that when Aldi promotes its 'private labels,' it also 'name-drops' big brands on the basis of good quality and low prices, shouting the slogan 'Disenchantment with big brands, private labels rise.'

This promotional tactic of belittling 'big brands' may inadvertently damage the trust relationship between Aldi and 'big brands,' losing opportunities for brand partnerships.

For example, on the shelves of Aldi's own dairy brand 'Youbai,' there is a conspicuous sign saying 'Not inferior to the neighbor, come try it!' And next to Youbai is Meiji milk, which is quite popular among consumers. One is a private label 'aggressively promoting itself,' and the other is a globally renowned brand. When the two are compared, consumers will naturally 'vote with their feet.'

To remove the 'filter' of big brands, Aldi needs to first ensure internally that its private labels have quality and price advantages when shouting slogans. Moreover, Aldi's 'private label strength' also faces a 'differentiation' battlefield.

Take Aldi's sea salt soda crackers as an example; the same size and taste are also sold by private labels of Sam's Club and Metro. When many competitors and oneself produce similar products, Aldi's 'private label strength' will also be weakened.

In addition to internal operational pressure, external competition cannot be underestimated.

After leaving Shanghai, Aldi will also face players with strong brand strength like Gaoxin Retail. It is foreseeable that a smokeless community retail battle will break out in the Jiangsu, Zhejiang, and Shanghai regions.