Big four retailers will never beat Aldi on price

By Laurence Gibbons contact

- Last updated on GMT

Aldi will never be beaten on price, says Evanschitzky
Aldi will never be beaten on price, says Evanschitzky

Related tags: Asda, Morrisons, Supermarkets of the united kingdom, Aldi

Aldi’s business strategy will prevent the big four retailers ever beating the discounter on price, according to a leading professor from Aston Business School.

Sainsbury, Tesco, Asda and Morrisons are fighting a losing battle when it comes to beating Aldi because its costs remain low as it stocks mostly own-label products, claimed Dr Heiner Evanschitzky, professor and chair of marketing at Aston Business School.

“This is a question of efficiency and meeting consumer demand without the frills,”​ she said.

A typical Aldi stocks around 2,000 products, whilst a typical big four retailer stocks 10 times as many.

Never compete on price

“This bulky, outmoded style means that the big four struggle with an underlying cost-base and will never be able to compete on price.”

Aldi benefits from being a family-run business that does not have to answer to shareholders, allowing it to take a more long-term strategic view on the market, she added.

Its meteoric rise in Britain mirrors its success in its native Germany, where traditional retailers have tried – and failed – to fight Aldi on price for the past 20 years, Evanschitzky claimed.

“Instead of competing on price, retailers need to be more creative,” ​she suggested.

“Quality, convenience, location, store appearance and service are all vital to keep today’s shopper interested.

“The discount brands will always be there for the discount shopper, but a significant chunk of UK consumers value quality and service above just what’s on the price sticker.

“Don’t fight Aldi on their home turf, fight them on your turf – giveshoppers more choice so everyone gets the supermarket experience they’re looking for.”

Aldi posted a whopping 65.2% rise in pre-tax profits to £260.9M for the year to December 31 2013. Its group turnover rose by over 35% to £5.27bn.

Profit rise

The profit rise comes as Aldi and fellow German discount chain Lidl took an ever-bigger market share​ from the big four retailers.

Morrisons launched its ‘Match & More’ scheme​ promising that if a comparable shop was cheaper at Aldi, Lidl, Tesco, Sainsbury or Asda, customers would receive the difference back in points, earlier this week.

Meanwhile, city analyst Shore Capital warned the discounters’ surge could be about to implode​ as the big four took action to tackle them.

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4 comments

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Cost!

Posted by Chris,

Price is clearly a factor, although consistency of product & reliable inbound service were part of the equation and the business I was with at the time had a good track record. However, they also like to split supply once a SKU gets to a certain size, therefore whilst they enjoy some supply contigency & competition elements to keep prices in check, the products will end up being different, but that's clearly not a major issue for them or their Customers. Then of course you have the issue of technical standards - and the 'big 4' doing the hard work in the supply base so Aldi & Lidl etc can take stuff from the same plants & be assured of certain standard being met - a sore point with one of our larger retailers for sure!

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Cost!

Posted by M,

Whilst they do not recieve discounts from suppliers, they award business on purely tendering between suppliers on cost. I have experienced situations where you will 100% of supply of that categoy for 6 months and then nothing! Thats not sustainable when everything is focused on cost!

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Long term commitment on quality and automation

Posted by John,

Aldi and Lidl target good average quality with commitment to their suppliers. It allows the suppliers to automate and optimize supply chain as they have a long term commitment allowing them to do the right investments.
If the big four continue bashing their suppliers, they will lose the battle.

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