A few years ago, when Aldi UK opened a store in Manchester’s city centre, the public opinion was that it was just a marketing trick: to open a hard discount store on such an expensive location could not be profitable. Now we know better: because of the economic crisis, the inner city stores are bringing in the biggest money.
Aldi’s new store in Queens (New York) is exemplary for the ‘new look’ Aldi in inner cities, says American retail expert Len Lewis. “New York is a fantastic market because of the high population density. The Queens store serves four times as many people as an average Aldi does. A marketing trick? More like a brilliant move!”
Not only Aldi, but also Lidl is keen on opening stores in such locations as Manchester city centre (like Aldi did) or the North London borough of Camden (like Lidl did). Retail expert Roberts points out that this is not a new evolution, but the internationalisation of an old strategy: “Although the typical Aldi location is on the edges of cities, several old Aldi stores have been built in city centres.”
Because of the current situation in the UK, where so many places in city centres and shopping centres are disused, this scenario is also possible there. Exactly the same economic situation that makes running a business in these locations so very difficult for most companies, makes it possible for hard discounters like Aldi to do so.
Two arguments in favour of city centres
High profile locations obviously cost more to rent, but Lewis sees two reasons why discounters should still consider opening stores there. “Owners are more likely to lower their prices for respectable companies that are certain to pay the rent in time, than for a small store with a higher chance to go bankrupt.”
“The second reason is the very high population density in places like New York or Boston. These locations, while very expensive, have such a high number of shoppers – often inner city inhabitants who do not own a car – that these locations are still quite profitable. In the US, you have the example of dollar stores like Aldi’s daughter Trader Joe’s, who are very successful in both poorer city centre neighbourhoods and in the more expensive ones.”
There is however a big difference between the two Aldi chains. Aldi Nord (North Germany, Benelux, France, Spain and others) is much more conservative, while Aldi Süd (UK, Ireland, South Germany, Central Europe, Greece and the US) fully endorses this new policy.
– Pascal Kuipers, Alsano Communicatie