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April 16, 2020

Aldi’s UK online grocery push will be closely watched – analysis

Discounter Aldi is to join the online grocery fray in the UK, launching a service for "vulnerable customers". Analysts from our parent company, GlobalData, weigh up the move.

Discounter Aldi is to join the online grocery fray in the UK, launching a service for “vulnerable customers”. Analysts from our parent company, GlobalData, weigh up the move.

Our proprietary data on UK shopping habits suggests a dramatic shift is occurring, with a move away from trips primarily made to bricks-and-mortar for most household staples to online grocery shopping.

And now German discounter Aldi is for the first time dipping its toe into the UK’s online food market, launching a service for “vulnerable customers” focused on ambient products.

According to GlobalData’s Covid-19 ten-week tracker consumer survey (scheduled to be carried out between 25 March 25 and 31 May), in week three, 35% of UK consumers stopped going to large grocery outlets altogether since the country’s quarantine started.

What’s more, a combined 36% frequented those outlets either slightly or significantly less often.

Covid-19 has forced brands and retailers alike to adapt their strategies and implement new services in order to maintain operations.

One such change is Aldi’s announcement. Prior to the outbreak, the retailer only offered limited products for online availability, such as its Special Buys – focused on non-food items – or certain alcohol products.

However, with over a third of UK consumers having stopped their visits to supermarkets altogether, the retailer has been compelled to change its policy or run the risk of losing patrons to rival grocers in the country. 

Aldi’s latest foray into online food is, so far, also limited. The retailer is to sell “ambient food parcels”, containing 22 items including tinned soup, rice and pasta. The parcels, which will retail at GBP24.99 (US$31.02) inclusive of delivery, will also be limited to one per customer.

But packaged-food manufacturers will be watching closely, especially brand-owners. Aldi is well known for its high-quality, private-label offerings. Should the company maintain its delivery operations post-pandemic, this could pose stiff competition for established brands.

Aldi’s affordability, paired with often novel or niche ranges positions, is in stark contrast to other UK players such as Ocado, which relies on premium, specialised offerings, such as vegan products, in order to maintain a competitive edge.

The move could also offer an added benefit to buying private label. Own-brand items, while accounting for half of UK grocery sales, are, among some consumers, still thought of as being of lower quality than branded products. Being available at a click of a button will help boost accessibility and encourage consumers to try some competitively-priced alternatives.

Aldi’s own-label suppliers may, of course, be heartened at seeing their products available in another channel.

The discounter is a long way from offering the full online ranges of its larger competitors in the UK such as Tesco, Sainsbury’s and Asda. However, Aldi’s move will be monitored closely, not just by its retail rivals but by manufacturers.

Should Aldi more fully join the online fray, it could open a new competitive battleground in the delivery of premium, private-label foods being to UK doorsteps. 

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