Better AND cheaper: Aldi’s Local offering is a real threat in convenience

The business book Blue Ocean Strategy challenges a paradigm held by many marketeers.  It suggests that rather than deciding to focus on product differentiation OR price, companies should aspire and plan to improve BOTH at once.  In other words, to get better AND cheaper.  That is the way to sustainable and even spectacular growth.

This certainly raises the bar when you are considering your company growth strategy.  It’s enough of a task to offer better products.  Or to make your products cheaper.  But both?

Aldi Local, the new convenience store in Balham, is a significant step away from Aldi’s tried and tested store model.  The space is a third smaller.  The location is in a busy high street.  There are no Special Buys (the non-food bit in the middle).  But the result for the shopper is impressive.

The food offer is an edited version of the full Aldi range (1500 not 1800 products), but with a bias to the premium end.  For example, the Specially Selected range is very prominent in the Meal For Tonight categories.  Products are well merchandised, with good lighting, colourful header boards and excellent display standards.  Navigational signage is clear, making it easy for shoppers to quickly find and choose.

Overall it is a pleasant shopping experience, comparable to the newer CoOps, themselves amongst the best new convenience store designs in the UK.

But the delivery of price and value has not been lost.  Some price points are higher than in other Aldis but it is still easy to find impressively low prices.  In the respective Food To Go sections, a can of Diet Coke is 52p in Aldi versus 85p in the Sainsbury’s up the road, and a bottle of Fizzy Water is 25p vs 60p in Sainsbury’s.  This is the kind of difference that shoppers will notice.  A demi-baguette from the In-Store Bakery is 22p.  So if you are really watching your money, the store delivers. Prices : Balham Aldi & Sainsbury’s May 2019.

In short, Aldi Local delivers on quality AND price, and may be about to redefine what value looks like to shoppers, in this channel. They are now extending the trial to seven further London stores.

In the last decade or more, Convenience has been a sector in which Tesco, Sainsbury’s then CoOp have found it easier to win, against less well organised competition.  But things are hotting up.  CoOp has a new confidence along with its new stores.  Tesco are talking about an upmarket Finest convenience format.  M&S Food has new leadership, new marketing and a new resolve.  If Aldi can roll out Local efficiently – and they will surely only take it forward if it works for them commercially – then the pressure only intensifies.  A new game of thrones is developing at speed in the convenience channel.

Jeremy Garlick is a Partner of Insight Traction, consulting with FMCG and Retail companies.  He was formerly Head of Insight at Sainsbury’s, Waitrose and Premier Foods.