This Investment Will Add another 2,500 Stores by 2020
This past weekend, the Germany-based grocery chain, Aldi, announced plans to invest some $3.4 billion in its U.S. business over the next three years. Currently, Aldi operates approximately 1,650 stores with plans to expand by another 450 by year’s end. This newest announcement from the discount grocer would bring that total to 2,500 stores by 2020. With those numbers, Aldi would be the number 3 grocery chain in the U.S., behind Walmart and Kroger.
The Future of Grocery Shopping?
The expansion of Aldi in the U.S. over the last few years has paralleled its expansion in other countries, namely the U.K. There, the expansion of Aldi and German rival Lidl has threatened to shut down or at least cripple historic market leaders Tesco and ASDA, Walmart’s UK presence. In the United States, the so-called “Aldi Effect” has already impacted the way competitors do business.
For example, on the heels of Aldi’s announcement this weekend, Walmart’s stock price fell 0.2% on Monday. In addition, the nation’s leading retailer announced plans to slash prices further. This enhanced a revelation to The Wall Street Journal last month that “The work that [Walmart’s] done to be positioned to compete started happening two years ago.” What, exactly, Walmart plans remains to be seen.
Still, the difference between Aldi and Lidl (whose first U.S. stores opened this week) and traditional markets is pretty obvious. Aldi operates much smaller stores with smaller overhead. They also focus on bulk buying only select items and offering them only through private labels. In stark contrast to Walmart and online rival Amazon (who’s made its own efforts to expand into the grocery sector this week), Aldi is not focused on being a one-stop shop. Instead, they focus on discounting. This strategy has proven effective across Europe as well as in the U.S.
What This Expansion Means
From a numbers standpoint, the Aldi expansion means more stores and more jobs. This is not a small effort with a few stores opening in some remote corners of the country. For example, Aldi will open its first Southern California stores next March. This previously untapped market is the home base of Trader Joe’s, and may represent a huge boost for the brand.
New stores in the U.S. also means new jobs. Aldi anticipates hiring upwards of 25,000 new workers in the next three years. These employees would help them serve up to 100 million customers per month. This is significant because it assumes a huge migration to Aldi and its discount model. However, given the fact that some 18 U.S. grocery chains have filed for bankruptcy since 2014, there is clearly room for someone.
Aldi’s U.S. CEO, Jason Hart summed the company’s goals up nicely in a statement, saying:
We’re growing at a time when other retailers are struggling. We are giving our customers what they want, which is more organic produce, antibiotic-free meats and fresh healthier options across the store, all at unmatched prices up to 50 percent lower than traditional grocery stores.
Whether this now $5 billion move will pay off, however, is still hard to tell.