German discounter Aldi will open its first two stores in China on 7 June. The two stores in Shanghai mark the beginning of an ambitious expansion scheme on the huge Chinese market, in which the retailer hopes to convince the growing middle class.
Chances and risks
While Aldi has been active for years on Alibaba's Tmall platform, it currently has no physical stores in China. The first two stores in Shanghai that will open next Friday are just a prelude: this year eight more Chinese stores will open, soon that number could rise as high as fifty or even a hundred. Specialist website Lebensmittel Zeitung has learnt the chain will adapt its usual policy in China: with modern stores and a product range of imported quality goods, it wants to be more up-market than in the other countries the chain is active in.
IGD analyst Nick Miles sees potential in the expansion strategy: in four years' time China will have passed the United States to become the world's largest FMCG market, and its growing middle class is very eager on quality products imported from Europe. However, he sees risks too: the Chinese prefer A-brands while Aldi is a very sharp private label player, and despite the local preference for digitisation Aldi's speciality is efficiently managing physical stores.
The rivalry with Lidl comes into play as well in this expansion: Aldi's arch rivals have shelved their attempts to enter the Chinese market. Now Aldi Süd, the branch that is also active on the American, Australian and British markets, tries to succeed where its rivals have failed.