Value to Shout About: The Aldi and Lidl Way

Back in the late-1990’s, dismal days for Sainsbury’s, the supermarket chain launched a high profile advertising campaign using John Cleese eccentrically stalking the aisles shouting about the great value of Sainsbury’s products. Buoyant, bumptious Tesco  were beating them up on price. The campaign was a monumental failure – embarrassing staff and not convincing even annoying shoppers. Seventeen years on, it’s Tesco who has been taking the beating – a salutary reminder of how the great wheel of retailing continues to turn! – and the current assertive retailers, Aldi and Lidl, are those that were dismissed by the “Big Boys” in 1998 as minor competitive irritants.

Aldi and Lidl continuously highlighting their credentials of price and quality. The motto of the Swap & Save campagin was “The only difference you will notice is the price”

In retrospect, we should have seen the hard discount wave approaching, after all, across The English Channel, there was plenty of evidence of their burgeoning success. So what have been the principal success factors for Aldi and Lidl in the UK?:

• a disarmingly simple retail model focusing on every day low prices – no hocus pocus promotional gizmos, with high-low pricing mechanics;
• good quality private label with European credentials (outperforming UK supermarket private label products in national awards);
• adequate but not overwhelming choice of skus;
• store locations, range of merchandise (e.g. premium tier private label), as well as economic recession has helped middle class acceptance of hard discounter retailers;
• seemingly random but surprisingly attractive “treasure trove” items available on a “WIGIG” basis (i.e. when it’s gone it’s gone!);
• international retail strength of both Aldi and Lidl gives them substantial buying power;
• rigorous but fair treatment of suppliers and mutually satisfactory longer-term commercial relationships;
• simplicity of commercial terms when dealing with suppliers;
• a willingness to adapt the Germanic hard discount model to the requirements of the UK market – e.g. an expanding fresh food offer;
• private ownership has enabled Aldi and Lidl to develop and stick to long-term strategies without the carping demands of City analysts;
• conservative but relentless opening of new stores;
• clever PR communications that moved shopper perceptions of the hard discounters from being marginal retailers through to mainstream grocery players – e.g. Aldi becoming the first supermarket chain to sponsor the UK Olympic team for Brazil in 2016;
• and shouting loud and long about their price and value advantages.

In 2014, Aldi and Lidl together spent £103 million on advertising. With a combined grocery market share of around 7.5% in 2014, these 2 hard discounters accounted for 25% of total grocery chain advertising spend. Unlike Sainsbury’s in 1998, Aldi and Lidl have had something to shout about and the shopping public has lent a willing ear! It’s been clever advertising, too: e.g. Aldi and Lidl poking fun at Morrison’s

Aldi joking about Morrisons when the British retailer claimed to be cheaper than Aldi and Lidl.

Simplicity is one of the values of Discounters.

The wheel of retailing will continue to turn and the ungainly supermarket Big Boys will claw their way back towards more commercial respectability (or, at least, some of them will!). But not before Aldi and Lidl snatch a few more market share points from slow-footed grocers. Make no mistake, the hard discounters are up and running as bona fide mainstream grocers – much more than top up shopping destinations.