Aldi turns attention to China

Starting in 2018?

The revealed information shows that Aldi Nord and Aldi Süd have agreed in February 2013 that Aldi Süd would head into China. Both branches do no want to compete in the same market and that is why they always decide together who will expand into a particular country. China is apparently worth double, as Aldi Nord will be given the lead in the next two international markets Aldi aims to conquer.

Manager Magazin has not been able to divulge any information about when exactly the discounter would enter the Chinese market, but specialists at PlanetRetail estimate that to be a 2018 event as Aldi will most likely take its time to thoroughly prepare. Aldi Süd had already registered the Aldi.cn domain in March 2003, but that registration will expire in March 2015 – which would by no means suggest that they would the Chinese opportunity slip.

Aldi Süd will face quite a challenge to tackle the huge Chinese market, especially as plenty of other Western retailers have failed to conquer the land of the dragon in the past. 

Asia is Aldi Süd’s fourth continent

The United States are Aldi Süd’s most important foreign market right now, with a 2012 turnover of 6.1 billion euro according to LebensmittelZeitung magazine. That is nearly half of the turnover it managed in the south of Germany that year: 12.4 billion euro. Great Britain is, by some distance, Aldi Süd’s third market with a 2.7 billion euro turnover.

Asia, thanks to China, would become Aldi Süd’s fourth active continent, following market penetration in Europe, North America and Australia. It would also be its first non-Western emerging market, one that is rapidly developing and digitizing with Alibaba‘s rise as prime example.

Double-digit Chinese retail growth

The Chinese retail branch may not have a steady growth, it has still managed a yearly double-digit growth despite the 2008 crisis, which makes China the world’s second largest retail market, trailing the United States. Retail turnover grew an astonishing 21.6 % in 2008 and 15.5 % in 2009. That grew again to 18.1 % in 2010 and dropped back down to 14.4 % in 2012.

Discount, particularly when it comes to food, is an underdeveloped formula in China. ‘5 Yuan’, which belongs to Nongongshang from Shanghai, and Dia, the Spanish discounter which was once part of Carrefour, are two well-known chains. However, PlanetRetail considers them price-aggressive convenience stores and not really Aldi-esque discounters. Thanks to a growing middle-class, both in the large and smaller (to Chinese standards) cities, Aldi Süd would probably be able to thrive.

Aldi has to build trust

“It is a sign of faith that Aldi Süd has decided to build a Chinese store network. It has always been quite careful and apparently has sufficient faith in China’s stability to invest long-term into an expansion”, PlanetRetail’s research director, Matthias Queck, said.

Chinese consumers focus on well-known brand products as private labels and (mainly) local Chinese brands are distrusted somewhat. Still, Aldi, which thrives on its own private brands, should not necessarily face problems in China, according to Queck.

“Aldi has allowed brand products into its product range in several other markets. It is true that Chinese consumer trust in private labels is very low and that is why Aldi will have to take its time to convince these consumers that its private labels are filled with high quality products. It will definitely be an entirely different type of culture to get used to in China. Aldi will have to create a safe supply chain, attracting suppliers that will obey food safety regulations”, Queck stated.