Aldi has become the latest overseas supermarket operator to open stores in China, the 8th was recently opened in Shanghai, but the German company faces a battle to win over customers in a fragmented market in which foreign operators have traditionally struggled: Tesco and Spain’s Dia abandoned operations in the country and Germany’s Metro is selling its China unit. Walmart and Carrefour have struggled to gain more than a single-digit market share.
Overseas companies have been hampered by remote decision making and difficulties adapting to Chinese shoppers’ preference for making regular small purchases of fresh vegetables to cook at home rather than weekly shops, according to analysts. However Aldi is taking a different approach, opting for smaller, smarter retail stores that are equipped with WeChat technology and offer speedy delivery options. The small size lets ALDI integrate the store deep in neighbourhoods and communities while offering around 1,000 products ranging from Ready-to-Eat meals to body care products. It plans to launch over 100 of these stores going forward.
Where WeChat Fits In
Aldi’s scan-and-go WeChat mini-program indicates its commitment to creating a localized Chinese shopping experience, negating the need for checkouts. Home delivery is offered within a 3km range. They take a page out of Alibaba's smart Hema/Freshippo stores: smaller, more centrally-located supermarkets selling quality imported grocery items. It is estimated that e-commerce sales account for 60% of total sales at Freshippo, indicating that all the money invested in smart retail technology is worth it.
Tmall Global as a Launchpad
Aldi first tested the China market in April 2017 by launching a flagship store on Tmall Global – what many to consider to be a brand’s official presence in China.
Tmall Global sells imported cross-border e-commerce items that don’t have to be formally imported in China, skipping over lengthy product registration and approval processes. Aldi sells cheap, high-quality private-label items such as dried apricots, Knoppers chocolate wafers, and Farmdale milk powder.
But what's more is that Aldi opened a sourcing office in Hong Kong long ago in 2015, enabling it to build out a robust supply chain for its Asia operations (including Australia). This means that it has been preparing for the China market for quite some time. Aldi's Tmall store gave it a channel to test new products and customers' reaction to them, without having to export them in bulk and incur inventory risk.
The three main channels through which customers can buy Aldi products: offline retail, WeChat delivery, and Tmall.
- Offline retail gives customers the chance to discover and try new products in the store, which is important for categories such as fresh groceries.
- The delivery services give customers the option of ordering food when they don't feel like going to the store, or if they forgot to purchase an item, or even if they just don't feel like carrying all those heavy groceries home.
- And lastly, Tmall Global gives customers the option of purchasing imported cross-border e-commerce items that may be more difficult to find in offline retail stores in China. For Aldi, it also gives management the ability to test new products online and customers' reaction to them before exporting them in bulk to China.