Aldi looks at online move as shopping habits change

Clive Perkins hasn’t been to a supermarket since March, but he’s just driven to an Aldi store in Loughborough to have his groceries delivered straight to his car.

He’s one of the first customers to try its new click and collect trial – a loyal Aldi customer for the past nine years prior to the pandemic.

“We’ve done everything online,” he tells the BBC. “We’ve been able to isolate because of the risk. We’ve got a regular slot with somebody else, but we’ll drop that if this works.”

For more than a decade, discounters have been the disruptors in the supermarket aisles, stealing customers from its bigger rivals and growing sales. But this pandemic has been disruptive for them.

They’ve missed out on the huge boom in online sales and increase in convenience store sales. Now Aldi’s dipping its toe into the online food market, trialling several new concepts, including a Deliveroo rapid delivery service and a click and collect service.

“It’s been an extraordinary six months, like nothing I’ve ever known in grocery,” says Aldi’s UK chief executive Giles Hurley.

“The business performance has been very, very solid… but we also recognise customer habits are changing and that we need to evolve our business to meet the new demands and we’re actively doing that.”

Aldi’s boss now wants to redefine discount retailing. The click and collect trial will soon expand to 15 stores.

“I’m very, very confident that this is a model that we can scale successfully,” he says.

“We have a unique model, a set of efficiency principles unrivalled in the market, and that it is my firm belief that we can apply those principles to picking and packing stock in a very efficient way for customers… I’m very excited about it.”

All this would have been unthinkable for Aldi a year ago. The business has just posted its annual results for the year ending December 2019 showing an 8% increase in sales to £12.3bn as well as a 49% rise in pre-tax profits compared with the previous 12 months.

But the pandemic has made things less easy.

“Aldi has still seen strong growth, they’re still selling 10% more than they did last year, but for the first time they’ve grown behind the market,” says Fraser McKevitt, Head of Retail and Consumer Insight at consumer analysts Kantar.

Aldi has missed out on the extra purchasing by consumers during the pandemic, he says, especially with people shopping locally and online.

“Shoppers were also doing fewer but bigger shopping trips so with the smaller stores the discounters have, they lost out a bit on that which isn’t a position they’ve been in before.”

Has the rise of the discounters been halted?

Mr McKevitt says he’s now seen a return to more normal patterns of shopping in convenience stores in the last month and that the level of online grocery sales has reduced slightly from their earlier peak, as people relied less on online after lockdown ended.

Aldi insists it’s more than holding its own and that shoppers are switching from the big four grocers to its stores.

“85% of customers still shop inside supermarkets and that still means huge opportunities for us to grow our business,” insists Mr Hurley.

And he says despite the dramatic changes in the grocery market, there’s no reining back on store expansion. Aldi is still planning to add another 100 stores over the next two years, creating another 4,000 jobs in 2021.

“We’re investing £1.3bn over this year and next, our biggest ever investment in Britain in over 30 years, expanding our business and that is testament to the confidence we have in our future here,” he says.

As job losses mount and family finances come under increasing pressure, shoppers may soon be worrying about the cost of their weekly shop, as much as about home delivery slots. The industry is bracing itself for a price war this autumn.

During the last recession, savvy shoppers switched to the discounters and their lower prices. The discounters have enjoyed rapid growth ever since.

Having been caught off their guard back in 2008, the big four grocers are now far better prepared and are already upping the ante with price cuts.

But Aldi insists it will win this battle: “We won’t be beaten on price. We know the most important thing for our customers is value for money and this is why we’ve made it our mission to keep our prices the lowest in Britain.”

As for reports about panic buying, Mr Hurley says there has been a bit of an uptick for certain items like toilet roll and pasta. However he insists it’s nothing like what the industry experienced in March and that availability is still “really good”.

There are no plans to re-introduce restrictions although it remains under review. He’s already written to customers urging them to only buy what they need.

It’s shaping up to be a festive period like no other, says Adam Leyland, editor of grocery trade magazine The Grocer.

Permanent shift

“In any other recession, it would all be about price, price, price,” he tells the BBC.

“But in the current environment with all the restrictions going on, price isn’t always as important when people are locked down, it’s also about availability and people are prepared to pay a premium when demand outstripped supply for online.”

He thinks the shift to online – currently 12.5% of all grocery sales – is permanent, and ignoring that market altogether is a dangerous game to play.

“You can’t be complacent because as a retailer you have to give the customer what they want,” he says.

He explains that both Lidl and Aldi previously used a business model for many years that had not been developed for a British market, and thus “weren’t able to make any progress”.

“Then they began evolving, from introducing shopping trolleys and credit cards to vastly expanding and improving their ranges,” he says.

“Now Aldi are trying new things again as they realise the world’s changed and if we have a second lockdown, it’s even more important that they are responding.”

Aldi already sells online wine and non-food. But going digital with groceries, even with a less costly click and collect service, would be a huge step.

The challenge is how to do it without compromising their low-cost business model which has served them so well.

The click and collect trial will be a fascinating test. The boss of Aldi says he’ll be listening closely to customer feedback and as well as the demand before assessing the next steps.

“What are they waiting for?” said one shopper. On our brief visit, it was already luring some customers back.