Aldi is continuously strengthening its high cost-performance positioning. Recently, Aldi's 'Super Value' line launched a 9.9 yuan 500ml strong-flavor pure grain 52-proof liquor, drawing widespread attention. Before this, products like a 9.9 yuan 100g facial cleanser, an 8.9 yuan 950ml fresh milk, and a 3.9 yuan pack of 8 sanitary pads had already surprised consumers. The 'Super Value' line, Aldi's private brand focusing on high cost-performance, was introduced in December 2023. In fact, since the second half of 2023, when Aldi marked its fourth anniversary in China, it has undergone a series of shifts from a community kitchen to a 'good quality, low price' positioning, and for the first time invested in marketing across online and offline channels like Xiaohongshu and metro stations. At that time, media conducted a unit price comparison, comparing Aldi's 'Super Value' line with Hema's 'Yishan' and Sam's Club products, finding that the vast majority of Aldi's 'Super Value' products were more price-competitive. Aldi is the China business of ALDI, the world-renowned German retailer standing at the pinnacle of discount stores. Founded in 1913, ALDI now operates over 13,000 stores globally with international revenue exceeding $100 billion, both figures higher than Walmart's. After more than five years of development, Aldi currently operates only in Shanghai, with the latest store count at 57. Taking Aldi as an observation sample, we will see how a foreign retailer gradually approaches, deepens, and adapts to the intense domestic retail competition, especially in Shanghai, a retail high ground city. In this process, Aldi's judgment of the competitive landscape, its grasp of changing trends, and its strategic determination and trade-offs will also inspire domestic retailers. Some domestic discount retail practitioners have long used Aldi (rather than Sam's Club) as a research sample, even using the same lighting fixtures as Aldi in their stores. Initial Entry into Shanghai: Community Kitchen In domestic retail experiments and reforms, we have always paid special attention to Shanghai. Here, a commercial ecosystem has persisted for over a century since the establishment of the concession in the 18th century, with annual social retail sales exceeding 1.8 trillion yuan, ranking first among Chinese cities. It boasts a leading density of commercial centers, specialty commercial streets, supermarkets, convenience stores, and community commerce, as well as a large number of middle-class and high-net-worth households. Since 2017, Shanghai has hosted the world's second-highest concentration of international retailers, surpassing London and second only to Dubai. Shanghai has the highest number of Costco (2 stores) and Sam's Club (6 membership stores plus about 80 front warehouses) in the country, and is also the birthplace and bridgehead of domestic new retail. Hema (about 70 stores in Shanghai) and Dingdong Maicai (about 280 front warehouses in Shanghai) have long played important roles in driving domestic retail. According to reports from the self-media 'Zuolin Youli', Boston Consulting Group once advised Hema to first achieve regional profitability, to go deep and achieve absolute monopoly in Shanghai, a single city. Originally, different styles of advanced retail forces converged in Shanghai, each undergoing local adaptation, ultimately resulting in fascinating cross-competition for customer groups. It is no exaggeration to say that Shanghai leads domestic retail by half a step. When Aldi first entered Shanghai, it emphasized its community kitchen positioning rather than cost-performance advantages. Its single-store area is typically around 500 square meters, with no more than 2,000 SKUs per store. Aldi's head once explained candidly: 'As a foreign enterprise with a relatively systematic and high compliance cost, competing on price in the Chinese market is not the best approach for Aldi.' Under these conditions, allocating a large area for bakery equipment and strengthening the supply of both Chinese and Western instant hot meals not only reflects some differentiated competitive advantages but also provides irreplaceability in competition with e-commerce. These features also earned Aldi a good reputation among Shanghai residents during the pandemic. When Shanghai lifted its lockdown, commercial real estate professionals mentioned Aldi alongside popular dessert and coffee brands as categories still actively expanding in the Shanghai market. In 2022, the Shanghai Chain Operation Research Institute also noted in a study that 'in the areas where Aldi operates in Shanghai, the frequency of middle-to-high-end consumers visiting Costco and Sam's Club has decreased.' At the same time, a shift towards cost-performance was brewing. Media citing informed sources said: 'After foreign executives (ALDI headquarters) visited the Chinese market during the pandemic, they proposed some change strategies.' This shift also responded to the mainstream trend of comprehensive discounting in domestic retail over the past two years. However, it must be emphasized that the high cost-performance emphasized by these Shanghai retail forces, including Aldi, is more of an adaptation to the K-shaped divergence in the low-inflation era—reflected in the same individual, sophisticated Shanghai consumers seek cost-performance in mass goods but are still willing to pay a premium for categories that offer unique experiences and lifestyles. In other words, Aldi's main customer base has not changed dramatically; behind high cost-performance, there is still a demand for quality, not an absolute low-price route. After all, the low-price route has not been easy in Shanghai: Yonghui Superstores, which once represented the highest level of domestic retail, has clearly strategically abandoned Shanghai's city center, only opening stores in peripheral suburbs; Biyide, which fully inherited ALDI's hard discount model, operated in Shanghai for seven years with about 150 stores before suddenly exiting at the end of last year due to a broken capital chain. Standing Firm in Shanghai: High Cost-Performance Apart from judging retail trends, Aldi's own slow accumulation is the objective foundation for its transformation. Over more than five years in China, Aldi has gradually strengthened its differentiated private label capabilities in categories such as dairy, bread, food, beef, and wine, and has continued to advance the process of switching private label suppliers from international to local ones. The launch of its private label liquor is a manifestation of this effort. Aldi's product competitiveness mainly comes from ALDI's core genes: high private label ratio and curation. After all, backed by ALDI, Aldi dares to claim a future private label ratio of 90% (90% is ALDI's normal level; Aldi is reportedly at 70% now), while Hema, the most daring domestic retailer, has delayed its 50% plan for a long time. From 0 to 90% private label ratio, ALDI has accumulated product capabilities over five or six decades. There are many background stories to support its emphasis on products. For example, the top-down category expert awareness. Theo Albrecht, one of ALDI's founder brothers, at over 80 years old, still spent every day in his office studying questions like whether a product from China could be promoted in a small area first and then expanded to 10 countries; or whether a product from India suits a particular market at a given time. Also, when ALDI wants to make a product, it gathers many suppliers to bid, selecting the 3 with the best quality from over a hundred suppliers, then negotiates prices. Moreover, when ALDI meets with suppliers, the first thing is to sign an integrity pledge, and then they discuss how to adjust and improve the product for listing, covering product composition, packaging, production processes, quality points, and international quality testing—everything based on data and evidence, a cold, pragmatic German system. However, in this regard, in the hard discount trend starting in 2022, domestic discount stores' admiration and learning from ALDI have more often led them into the misconception of focusing only on price. Category management expert Zhang Zhiqiang once told us that discount stores should not engage in indiscriminate online price comparison and reckless price cuts, but should be based on confidence from absolute cost advantages, resulting in autonomous pricing. Zhang believes that ALDI first thinks of many ways to control costs, then adds a fixed markup rate on top of its costs. Because they are confident in their costs, knowing that even with these fixed gross margins, they can survive well even if their prices are lower than others. But most retail enterprises find it hard to survive this way; directly copying their pricing will definitely not work. He mentioned that in Aldi stores in Shanghai, many products are not at absolute low prices. For example, Coca-Cola sold at Aldi does not have a significant price advantage; it does not engage in desperate price cuts but maintains prices at a level where it can live comfortably. However, this 'non-absolute low price' state has even led domestic Aldi to face doubts of having 'changed' and 'no longer being a poor people's supermarket.' In fact, Mu Yi, a consultant at Lianshang.com, once mentioned in a speech that ALDI is not actually a poor people's store. As a discount store originating in Germany, its customer base, translated into the domestic context, is more oriented towards the general public. After ALDI expanded to the UK, due to the much higher consumption level of the British compared to Germans, ALDI upgraded its product structure to adapt to the new competitive environment, resulting in a 2.0 version. In Mu Yi's view, domestic Aldi is more like this 2.0 version of ALDI, targeting the middle class. The domestic market is large enough that even if the middle class is a vertical segment, its market capacity exceeds the sum of several European countries' markets. Deepening in Shanghai: Localization Another doubt about Aldi is whether marketing its own channels and private labels violates ALDI's principle of saving all costs. Similarly, the actual situation is that ALDI does not invest in advertising in Germany, but in other markets such as the US, Australia, and the UK, to compete with local retailers like Walmart and Costco, ALDI advertises in newspapers and on TV, often using comparative tactics to highlight its quality and cost-performance advantages. For example, in May this year, ALDI UK released a 30-second video ad in the form of a parody of a popular song. The ad's message was: we see other supermarkets trying to compete with ALDI on price, but only one supermarket can match ALDI's prices on all products. Competitors promoting a few items can never let customers enjoy all of ALDI's advantages. Consumers buy from us not only cheap goods but also award-winning high-quality products. Retailers advertising themselves are by no means limited to ALDI. Distributing promotional catalogs and prices in newspaper inserts or self-printed flyers is the oldest form of retail advertising. Retail advertising in mass media often aims at longer-term goals, such as building a channel brand image, which is also a very common choice for overseas retailers. Moreover, consumer trust in retailers' private labels often comes from the transfer of trust in the channel. Therefore, whether through brand advertising to build a trustworthy channel brand image or through traffic advertising to subtly promote the channel while ostensibly promoting products, in today's increasingly fragmented environment, these are ideas that domestic retailers can learn from. Aldi's spokesperson is 'Aunt Xue' Wang Lin, probably the female celebrity most associated with the classic Shanghai image in the minds of ordinary viewers; Aldi's advertising slogans also include Shanghai dialect ads. Aldi has repeatedly expressed its firm determination to deepen its presence in Shanghai. According to its China head in 2022, as China's middle class is rapidly expanding and the Chinese food market has huge potential, Aldi will prioritize the Yangtze River Delta region with a total population exceeding 100 million. 'The opportunity in China is huge; in Shanghai alone, Aldi could open 500 to 600 stores.' (For reference, Yum China celebrated KFC's 500th store in Shanghai in July 2023.) To this day, Aldi has not yet expanded beyond Shanghai. While densifying its store network in Shanghai, it is also more deeply analyzing local consumption habits and developing private label products and finding suitable domestic suppliers based on those habits. In Aldi's view, regional rooting and accumulating strength for future development are clearly more important than pursuing speed and scale from the outset. In terms of localization, Aldi is probably the best-performing new foreign retailer. Especially in food and beverages, the category that emphasizes localization the most, at Aldi, besides the Western desserts, steaks, and smoked salmon that foreign retailers typically excel at, there are also Shanghai smoked fish, soy sauce duck, salted duck, hot and sour fern root noodles, and the long-popular International Hotel butterfly crisps. All are in small packages or platters, which are undoubtedly the choices preferred by domestic consumers. As early as 2014, a former Aldi China executive came to China and surveyed more than 40 cities, visiting many supermarkets, convenience stores, and hypermarkets. After concluding that Chinese e-commerce was more developed than offline retail, Aldi tested the Chinese market through e-commerce channels in 2017, and two years later, its offline stores officially landed in Shanghai, maintaining a very restrained expansion pace. According to reports from New Distribution, Aldi's sales per square meter is certainly excellent among domestic supermarkets, but internally it is still considered unqualified, and the model needs further refinement, with eight years of planned losses. Restraint, low profile, and slow but steady progress are ALDI's consistent style. Historical evidence shows that when ALDI enters new markets (such as Australia and the US), its early development is relatively slow, but once it accelerates, subsequent growth becomes exponential. We have reason to believe that if all goes well, Aldi's subsequent growth will also be like this. It must also be said that in terms of understanding and implementing localization, leading European and American companies with years of globalization experience are indeed far ahead.
PS: Click 'Read Original' to view more about the 6th China FMCG Conference and the 3rd China FMCG Hard Discount Conference & the 3rd China FMCG Distributor Conference...