Aldi's online grocery test signals big changes ahead

April 13, 2015 

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Aldi’s move to test online grocery in the UK shows that even a very successful hard discounter (and one that's rapidly gaining market share) doesn’t want to miss out on the fundamental opportunity ecommerce represents: The fact is, more households are finding advantage in doing at least some of their grocery shopping online.

Aldi has also shown it’s willing to compromise some of the efficiencies of its ultra-low cost business model to drive stronger sales growth, and it's already started selling liquor online in Australia. If these ecommerce tests lead to a roll-out, Aldi is likely to use this new channel to win the big incremental sales increases that go with being first in the market.

Aldi has some operating advantages, if they pick online orders in their stores.

• The tightly edited assortment gives customers the opportunity to meet most of their grocery shopping needs.
• Smaller stores allow for faster picking of orders.
• The double-your-money-back guarantee gives customers a reason to trust Aldi to select their grocery items.
• Aldi’s digital communications (website and app) already exist and given them a digital presense.

How they decide to fulfill online orders may turn out to be a limiting factor.

• In-store pickup doesn’t offer significant time savings, because shoppers can already get in, shop and get out fast; however, skipping the “shopping experience” may be attractive to some. 
• With such a small format, there’s not much space to hold orders and process transactions.
• Delivery (plus fees) needs to generate enough gross profit dollars to offset the cost of getting the product to the customer’s home, and given Aldi’s low margins and relatively low delivery densities this won’t be easy.

Aldi could use online shopping to give many more households access to their exceptionally low prices – and create lower cost fulfillment options by offering subscriptions (which would also accelerate same-store sales further).

Bottom line

Aldi’s interest in offering their shoppers an online grocery option in the UK is one more sign of the company’s increasingly ambitious growth plan. When one of the world’s fastest growing retailers starts to seriously consider ecommerce, it’s time for all the other competitors to take notice.