Posts Tagged 'Aldi'

Is Aldi moving “uptown” too fast?

Here’s a recent comment from RetailWire about Aldi, and its decision to open more stores in upscale suburbs and neighborhoods. I think it’s a smart idea:

Many of the original Aldi locations (at least here in the Milwaukee area) were in lower income neighborhoods often suffering from “food desert” syndrome. The stores filled an important niche, but eventually Aldi started growing into middle-income and more upscale suburbs here. I’m sure the same phenomenon has happened around the country. If Aldi is serious about upgrading its merchandise content, the store experience has to keep pace.

Again, a local parallel: Pick ‘n Save stores (first part of Roundy’s, now a Kroger division) began as bare-bones stores with food displayed in cut-open shipping cartons stacked on empty gondolas. The formula worked for awhile (Pick ‘n Save became the market share leader here) but eventually customers expected a better experience. The same is true of outlet malls — from “piperack” operations to very upscale today.

So Aldi is making the smart move, especially where the trade-area demographics dictate, as long as they don’t simply duplicate their Trader Joe’s formula.


About that “whole paycheck” perception…

Some of my earlier comments about the Amazon-Whole Foods deal touch on the expected benefits of better e-commerce execution and predictive data science. But let’s not forget that Whole Foods has a price perception problem that Amazon needs to fix. Here’s a recent comment from RetailWire:

I teach a college-level class in retail management. When I surveyed the class about where they shopped, most answered Aldi, or Trader Joe’s, or Metro Market (the Milwaukee brand of Kroger-owned Mariano’s). None of them shops at Whole Foods even though the store is in the neighborhood where most of them live.

There is no doubt that Whole Foods’ “premium price” reputation has kept many shoppers away, as they face more competition in the “organic” arena. I believe the first round of price cuts is just the start, and it simply moved some overpriced key items to the “market price.” Expect more of this from Amazon in the future, but also expect Amazon to build Whole Foods’ base on its potential e-commerce and home delivery upsides.

Groceries are battling too much space too

Excess square footage in general merchandising has been well-documented, especially with 2017’s wave of store closures. The trend hasn’t swamped grocery retail — yet — but don’t be surprised if the advent of online grocery shopping will take a toll. Here’s my comment, from a recent RetailWire discussion:

The grocery business is suffering from the same “overspace” problem that has plagued general merchandisers for years, leading to waves of store closures this year. The retailers in the middle — the old standbys like Kroger — are particularly vulnerable to increased competition from discounters, small-format stores and retailers doing a better job engaging with “foodies” and Millennials. (At least Kroger has a winning concept with Mariano’s in Chicago.)

There is no doubt that shopping behavior is changing. Some shoppers are opting for more frequent but smaller trips for fresher food, while others are bulking up at warehouse clubs. Aldi, Lidl and Trader Joe’s are offering smaller stores with curated assortments, and now Amazon is lurking in the background with its purchase of Whole Foods. As a regular shopper at Kroger’s “Metro Market” chain in Milwaukee, I can tell you that the overwhelming amount of choice (to fill all that space) makes even a simple shopping trip harder than it should be.

While some mid-tier chains are in a better position than others to survive, some industry consolidation is probably long overdue here. Meanwhile, here’s a related post about mall developers looking to fill empty space with food retail:

It’s ironic that we’re talking about food stores taking over vacant mall space today, after discussing excess square footage in the grocery business yesterday. There may be specific malls where it makes sense to add a small-footprint store like Fresh Market, but it’s hard to see how full-line mid-tier stores like Kroger can make this work on a large scale despite its test in Ohio. Presumably the grocery store would be the “last stop” on the shopping trip, if the shopper visits the rest of the mall at all.

The entire issue comes down to mall developers and how they reinvent all that real estate. Southdale (outside Minneapolis) is replacing a JCP store with a three-level fitness center; other malls are adding more dining and entertainment. But pulling off-mall retailers (TJX, Costco) into the fold may be a more viable solution if the price of entry is right.

Target’s continued struggles with groceries and supply chain

I’ve combined a couple of recent RetailWire comments here — first about changes at the top of Target’s grocery business, and second about new hires on the logistics front — to reflect my concern that the company continues to have problems executing. First, about food:

It’s hard to judge Ms. Dament’s performance based on less than 18 months on the job and the possibly insurmountable challenge she faces. Maybe she underperformed, maybe it was a bad cultural fit or strategic clash –who knows? Anybody trying to turn this around quickly has not been dealt a winning hand.

Brian Cornell wrote off the Target Canada fiasco very quickly, but I’m not sure he can walk away from the grocery business so easily. The company spent billions on remodels and infrastructure to establish the business, and it doesn’t appear to have a replacement strategy waiting in the wings.

But how does Target fix it? It’s not a “top of mind” business and doesn’t have the critical mass needed to draw weekly shoppers. Perhaps Target should hire somebody from a more disruptive grocer (think Aldi or Trader Joe’s) who can offer up a more innovative, curated approach to the category.

Second, about logistics:

I’m no expert on supply chain management, but it’s clear that Target recognizes a logistics problem when it hires executives from two of the best in the business — first Amazon and now Walmart. I also don’t know whether Target has spent competitively over the years on logistics (compared to its competitors) but this is a longstanding issue. One of the biggest problems that doomed Target Canada was its inability to keep the store shelves filled, and anybody who shops Target regularly sees plenty of empty pegs on a regular basis.

Target has long pushed the idea of inventory turnover at the expense of satisfactory in-stock rates. If their new hires can accomplish both goals, more power to them….but the company needs to commit to higher service levels first, not just more speed and lower cost.

Kroger’s to buy Roundy’s: More consolidation on the horizon?

The announced acquisition of the Roundy’s stores (Pick N’ Save, Mariano’s, Copps) is of special interest here, because Roundy’s is a hometown Milwaukee retailer. I describe it (on RetailWire) as a “tale of two companies,” including some valuable assets for the Kroger’s portfolio as well as some underperforming stores:

The success of Mariano’s certainly gives Kroger a foothold in the Chicago market, and a vehicle for brand positioning much different from Jewel or the big discounters’ grocery operations. Mariano’s may be the prize posession but is a relatively small part of Roundy’s portfolio.

Roundy’s still generates most of its sales from its mid-market Pick ‘n Save and Copps locations here in Wisconsin. These stores have steadily lost market share to Woodman’s, Walmart, Aldi, Costco and now potentially Meijer. And, frankly, Roundy’s has been slow to expand its Metro Market concept (the local version of Mariano’s) fast enough while the upscale (and locally owned) Sendik’s chain has expanded rapidly.

As a shopper at my neighborhood Metro Market and Pick ‘n Save (about five miles apart from each other), I hope Kroger management brings better operating attention to detail to the market. Long checkout lines, expired dairy, and an overabundance of private brand have not helped Roundy’s win the market share war. Meanwhile, Mr. Mariano has been more focused on his personal re-entry into Chicago, having lost his job at Dominick’s to another takeover several years ago.

Aldi: The future looks bright, but…

Aldi is one of the fastest-growing food retailers in the country, with vast areas yet to be developed. I comment below (from a recent RetailWire discussion) about some of Aldi’s innate strengths:

Aldi has some key competitive advantages that should continue to propel its growth. First, its assortments are tightly edited and competitively priced. And its real estate strategy can “travel” far from the lower-income neighborhoods where it began to build its name, to more affluent shopping areas with plenty of development opportunities for small-footprint stores.

Perhaps the biggest threat on the horizon is Walmart, especially if it decides to speed up the rollout of its own small-format stores. But both stores have an innate advantage over other competitors in terms of a low-cost operating model.

“Small format” momentum continues to build

Today’s RetailWire discussion focuses on traditional grocers (Publix, Kroger and so forth) who are developing small-format concepts for college towns, resort communities and other locations where a full-sized supermarket can’t pay for itself. As I discuss here, it’s part of a rapidly growing trend throughout the retail industry:

Small format stores make a world of sense for both food and general merchandise retailers. They provide edited assortments aligned with the brand equity of the parent company. They also offer the retailer much more flexibility in terms of location strategies and site selection.Most national chains have too much square footage devoted to large-scale prototypes. Full-line discounters like Walmart and Target have already figured this out, so it’s not surprising that food retailers are looking at similar growth opportunities.

After all, why should TJ’s and Aldi have this idea all to themselves?