In February, Aldi North America, the German discount retailer with U.S. headquarters in Batavia, Ill., did something that it had never done before: It lowered its everyday low prices 12% to 27% on more than 100 of itstop-selling items at 60 stores serviced by its O’Fallon division in O’Fallon, Mo.
With a core base of lowerincome shoppers, Aldi was attempting to attract newshoppers seeking price reliefto compensate for rising gas and food prices and a struggling economy.
Though Aldi is also running TV ads for the first time and receiving more media coverage, “we do know people came to Aldi for the first time because of the pricing effort,” said Charles Youngstrom, president of Aldi North America, who shares the title with Vern Frazier and Jason Hart. “In our interactions with customers, people have commented that they were aware of the lowered prices and that it was unique for a grocer to lower prices the way we did. Included among thosecustomers have been conventional supermarket shoppers who had not traditionally shopped with us.”
Aldi, which runs more than 950 limited-assortment stores in 28 states, will continue to monitor the performance of the O’Fallon division relative to the pricing program before deciding “how and when” to replicate the price cuts in other markets, Youngstrom said. The chain did an estimated $5.8 billion in sales last year, relying primarily on privatelabel items.
Even without lower prices, Aldi’s everyday-low-price position makes it appealing to consumers in a weakened economy. On the other hand, poor economic conditions also mean that its “core customers have less money to spend,” said Neil Stern, senior partner at McMillan Doolittle, Chicago. As a result, he added, the chain has been working hard to reposition itself in the U.S. “with more interesting products” to appeal to a broader audience, as it does in Europe.
Aldi is opening more than 100 new U.S. stores in 2008, vs. about 50 stores per year in recent years; more than half of the new stores have opened to date, and 25 more will be unveiled in Florida — a new market — between September and November. The company’s first two Rhode Island stores debuted this year.
Construction is under way on Aldi’s approximately $40 million, 500,000-square-foot distribution center in Denton, Texas. After its completion, the chain plans to open 25 stores in the first yearthroughout the Dallas-Fort Worth area.
— MICHAEL GARRY