The british market research institute TNS recently announced that two of Germany´s biggest discount retailers – Aldi and Lidl – have managed to grow their market share in britain by 20 and 12,3 percent respectively in the second quarter of this year. Both companies are trying to grow in the british market since quite some years – Aldi starting in 1990 and Lidl in 1994 – but their market shares couldn´t grow to more than 3 percent (Aldi) and 2,4 percent (Lidl). But it seems now that they are catching up finally.
So what are the reasons for this remarkable growth rates so that even Terry Leahy – CEO of Tesco – is already speaking about an “Aldi-effect”? First of all the changing circumstances with Britains economy looking to slide into a recession, growing unemployment and a 10 percent increase in food prices in the last year did make people in britain be much more price sensitive then in the past. And secondly the discounter concept of Aldi and Lidl which is based on puristic but cost efficient stores and a rather small but still high qualitaty array of products. Especially the second element withholds a good purchasing strategy as the average british retail supermarket does hold an range of products of 30000 items whereas Aldi is concentrating on only 900 and Lidl has 1600 products in their stores. This concentration on rather small assortments means that Aldi is actually able to raise the volumes of these products and negotiate better prices – which they can pass on to their customers. With this concept the discounters did have a tremendous success in Germany where they have also totaly changed the german retail market.
Tesco might still be by far the market leader with a market share of over 30 percent but it will probably have to watch closely if this “Aldi-Effect” will continue. Especially after Paul Foley – Managing Director of Aldi UK – has now announced that Aldi to invest about a billion GBP in the coming 5 years to raise the number of stores from 430 to 1500.
So this also shows that in every crisis there lies a chance for someone – you just have to have the right concept for it.
