Few would have been surprised to see Aldi’s strong set of trading results for 2014, published earlier today. The retailer’s market share performance has been phenomenal and its store opening programme has allowed it to reach new shoppers up and down the country.
What was less expected was the retailer’s announcement that it is to launch an online business next year, starting with wine and then non-food. Some might argue that such a venture could be a distraction from an existing business model which is currently firing on all cylinders, but we see this as a shrewd move.
First of all it gives the retailer national coverage resulting in access to underserved regions and the ability to introduce the brand to new shoppers.
Second, the retailer is wise to start with wine and non-food – categories which will be less margin dilutive than a full grocery home delivery service. It’s also worth mentioning that wine has served an effective category to draw in new, particularly lucrative more affluent shoppers, to try their stores. Its eclectic range of non-food products has been a staple footfall driver for Aldi for many years, and we believe it can attract online traffic too.
Finally, at a practical level, both wine and non-food can be run independently from its existing core supply chain .This will minimise complexity and prevent potential distractions from a core business which still has substantial scope for further growth.
This is Aldi’s time. The retailer continues to demonstrate an instinctive connection with the mood of the nation and is ideally positioned to serve the changing UK shopper. Its move online, we believe, is another reason why the retailer will continue to outpace the market over the next 5-10 years.