A challenge to Full Assortment Retailers and Branded Goods Industry (FMCG) (shortened version)

Transcription

1 Trend s Day Budapest, May 6th 2008 Competing with Aldi & Lidl - A challenge to Full Assortment Retailers and Branded Goods Industry (FMCG) (shortened version) Hermann Sievers, smk-consulting, D-Hamburg 1

2 Brief History Aldi 1913 Anna Albrecht, Theo & Karls Mother, opened tiny shop in a coalminers neighborhood in Essen 1946: Theo (24) & Karl (26) overtake shop 1950: 13 shops 1960: partition North (Theo)/South (Karl) 1961: first Aldi-store ( Albrecht Discount ) 1966: 300 stores; ca. 350 sku; ca 400 Mio 1968: Aldi South: first store outside Germany (Hofer/Austria) 1971: Theo Albrecht kidnapped and ransomed for 3,5 Mio 1973: Aldi North: first store outside Germany (Belgium) 1997: first Aldi-PC (Hype!) 1998: frozen products (South) 2003: fresh meat pre-packed (North) 2004: cigarettes (South) 2005: fresh meat pre-packed (South) 2006: prepaid-tariff mobile phones 2007: Travelagency 2008: Test Newspapers (North) 2008: ca Aldi-stores international, ca sku, 40 bill. 2

3 Clear positioning Aldi Price + Aldi - Supermarket? + Quality - 3

4 Aldi Germany 2008 North: 2500 South:

5 What makes a strong retail brand Clearly defined appearance strict implementation Disciplined management of the retail brand Cautious with changes 5

6 Less is more Assortment sku, f.e. introduction frozen products led to delisting non-perishables (canned food) Limited offer per category, occasionely two price levels Few, but the right products = high turnover = freshness More than 90% private label; brands often in different packaging or volume Twice a week non food specials to attract and surprise No frills store design, service, packaging New target groups through special assortment (champagne, salmon, specially selected wines (20.- and more) Price leader! But continuous uptrading: storedesign, assortment, packaging, advertising (especially Aldi South) follow trends 6

7 Aldi: less is even more lowest price for good quality Details are decisive for success Aldi is not a pioneer neither in conquering a country, nor in technique, nor in assortment But when it comes to launch, it s perfect Being quiet is first commandment Concerning suppliers: aldi is hard and consequent, but not unforgiving Reduction on assortment is reduction on customer complexity Slim organization, f.e. no market research >> keep it simple! 7

8 Trial & error: example cheese Best customer is the one who shops regularly and buys much Which varieties of cheese are really needed? Strong demanded, easy to handle-products for every day Best quality Internal consideration, talks with some potential suppliers* Test in some outlets or one region for some months Analysis of test results, perhaps check another variety Decision, to introduce into all stores or refrain from it *suppliers too can suggest a new product 8

9 Less is more: tight assortment reduces complexity* 24 varieties marmalade 6 varieties marmalade Customers watching interested 60% 40% Of these: buying 3% 30% Form 1000 customers, these buy actually *Journal of personality and psychology 6/

10 Don t underestimate the convenience of shopping at (Aldi-)discount-stores due to tight assortment driving to store collect purchase pay Dense store network - > short distance to store Many parking lots -> no search for parking and short distance from car to store Limited and flat assortment, but all relevant everyday needs covered(preselected) -> short picking process All stores have a similar interior structure -> easy and fast orientation Very efficient check-out systems, no long waiting in line* -> short waiting time at check-out *payprocess by customer cost time 10

11 Aldi: strict quality standards 11

12 The quality positioning has to be supported by the store before sales after sales Store interior cleanness in store: neat and tidy arrangement of goods, f.e. cut of cartons, remove empty cartons regularly employee s uniform Aldi warranty Each product you are not satisfied with will be refunded or replaced (up to 30 days after purchase) Sales manager s visits Each complaining customer will be contacted directly by sales manager If customer agrees, sales manager will conduct a home-visit to apologize and hand over a gift Implementation of Aldi warranty Aldi refunds or replaces all products, even if warranty already expired or products are not bought al Aldi 12

13 Besides Convenience the creation of a shopping experience through special buys is important smart buy! Thematic promotions during a year (plan for 2009 too?) DiY School Toys America You will need it once! Springcleaning Golf Easter-decoration Barbeque Beach holiday Cycling 13

14 Aldi: keeping up with trends wellness & organic 14

15 Aldi: limiting factors to conquer a country What does the consumer want? Are they sufficiently cultural sensitive? Is there already a well known minimum-price? Retail trade focuses on aldi the consumers too? How many customers do already know Aldi and what is their image? Does Aldi target the right customers? Buying side: enough local products? Site-policy: enough car-density? If Lidl/Penny/Plus are already on the market how does Aldi differentiate? 15

16 16 Aldi International I 2008? South Aldi Greece 2008? South Aldi Slowakia South Aldi Hungary South Hofer Slovenia South Aldi suisse Switzerland South Aldi Australia South Aldi Ireland South Aldi UK South Aldi USA South Hofer Austria /1960 South Aldi Süd /1960 North Aldi Germany stores (ca.) since Aldi-Group name country

17 17 Aldi International II North Trader Joe`s (USA) North Aldi Poland North Aldi Portugal North Aldi Spain North Aldi Luxemburg North Aldi France North Aldi Danmark North Aldi Netherlands North Aldi Belgium /1960 South Aldi Süd /1960 North Aldi Germany stores (ca.) since Aldi-Group name country

18 Brief History Lidl 1920/30: start Lidl & Co wholesale fruits/tropical fruits 1930 ff: food-wholesale Lidl & Schwarz 1973: Test new discount format Lidl in Ludwigshafen 1978: start national distribution Lidl (30 stores) 1980: takeover Lidl-wholesale by Metro; C+C remain 1984: first Kaufland -Hypermarket ( Hyperdiscount ) 1989: first Lidl- store outside Germany (France) 2003: takeover 17 Ruef C+C-stores by EDEKA focus on Lidl & Kaufland; Introducing fresh meat at Lidl ( 2 years before Aldi!) 2006: purchase east-german beverage company MEG 2008: Lidl-presence in 24 countries; but retreat from Norway; plan to build a big chocolate factory (private label)near Cologne 2008: 500 Kaufland/ 7300 Lidl in Europe; ca. 50 bill. (Lidl: 33) >>faster and more aggressive than competitor! 18

19 Typical Lidl-store Germany 6000 m² site m² sales space/1.300 m² total parking lots Ca citizens in catchment area 19

20 Lidl Philosophy We keep it simple... our business is very simple: we buy and sell with the objective to offer our customers top quality products at the best possible prices. On a broad range of everyday products, we offer a great selection of over 1100 different products. All products are constantly monitored under our strict quality control policy. We only work with suppliers, who maintain this high standard of quality. Constant high turnover of goods and frequent delivery rotations also help us maintain our freshness guarantee. Our selection of products is supplemented regularly by new, attractive and inexpensive Weekly Specials, e.g. various household items, textiles, electrical items, sport and leisure items etc. We attribute our success largely to the consistent company policy: " top quality products at the lowest possible price.". The price advantages of purchasing in bulk, using competitive international prices to buy raw materials and goods are constantly being passed on to the price-conscious Lidl-shopper. In order to pass these advantages on to the customer, we don t waste money on unnecessary equipment in our stores or on flashy presentation. These savings in expenditure are passed on to you the customer. Our stores are characterised by our efficency and our friendly staff. The clear and simple arrangement of the aisles and product presentation throughout our stores enables our customers to orientate themselves quickly and easily. 20

21 Lidl Concept: Aldi plus brands 1900 products (sku) Ca. 500 branded products in about all categories Everyday low price with core assortment (private label) Heavy price promotions with brands (key factor for growth!) Non food thematic promotions (via pamphlet + newspaper) Food thematic promotions (f.e. american food) Two advertisements per week (via newspaper) One pamphlet per week (28 pages, 4c, high quality) Trendy with private label (wellness, organic, cosmetics) Add nutrition facts to all product packaging High class packaging design >>Uptrading! 21

22 Lidl: site-requirements (Cyprus) We require further sites throughout Cyprus to continue our phenomenal growth, either for purchase or for renting situated in regions with population exceeding habitants and that will fulfill the following conditions: m² on commercial roads m² ground floor parking spots We undertake every necessary Constructions, Conversions, and Renewals. Submit your property offer online Address: Lidl Cyprus Nikolaou Pentadromos Center, Thessaloniki str., Block B, 10th Floor, Off P.O.Box , CY-3309, Limassol 22

23 Discount expansion in Germany: Aldi consolidates, Lidl speeds up Chain 03/2008 stores 09/2007 stores Difference absolute new Aldi North Aldi South Lidl Penny Plus Netto DC Norma Netto DK

24 In 2007 for the first time Lidl operates more stores than Aldi in Europe Number of stores in Europe Aldi Lidl

25 In countries, where both competitors are present, Aldi has higher market share (Exception: France). 30,0 Marketshare food retail national ,0 20,0 Aldi Lidl 15,0 15,6 10,0 5,0 0,0 9,4 15,6 13,5 2,7 2,0 14,9 10,5 4,2 8,7 3,5 11,6 8,1 6,0 1,9 3,5 5,1 4,2 4,0 2,8 Germany Ireland Austria Greece Belgium Netherlands Portugal Finland Slowakia France Czech Rep. Hungary Sweden Poland 25

26 European Expansion Aldi/Lidl Ranking 2007 Rank No. 1-5 Aldi No. of countries 5 Lidl No. Of countries 4 No No New entries >5/

27 EDEKA GUT & GÜNSTIG economy brand 27

28 EDEKA GUT&GÜNSTIG Philosophy: Benchmark Aldi - assortment of core-products (ca sku) - Identical in quality (packaging & product & taste) and price Umbrella-brand design, cheap -looking Placing: medium to low No innovations, only me-too Aldi Suppliers: usually 1-year contract, quality check 28

29 In the shelf: easy to find 29

30 EDEKA Reichelt Berlin: Service, tasting, special products, design&light 30

31 Care for your local customer Consumers like Stop and Go - purchases in neighborhoods Supermarkets offering home or neighborhood qualities, will rather be anchored to the everyday life of the consumer. Quelle: Rheingold 31

32 EDEKA: specialities/local products 32

33 Customer Loyality 33

34 Learnings supermarket-retailers: what you should look after Economy brand, key products, quality&price-level Aldi as a defensive tactic Differentiate by quantity and quality of assortment Fix your core assortment/prominent products Consider organic and convenience Offer the best fresh products (fruits/produce/meat) Be the local hero for local products Be close to your customers, improve your service Examine customer loyalty schemes Look for an emotional shopping experience But don t start a price war! Don t undercut Aldis prices longer than for days, otherwise the empire strikes back! And you will loose. 34

35 More learnings Look for co-operative promotions with fmcg-industry Focus on thematic activities, set new topics, use brands Be close to your customer: events/focus-groups etc Focus an special assortments (f&p, wine,convenience food), If FMCG launched a real innovation: be fast to list Care for your employees Co-marketing/promotions Believe in your own strenghs! >>Create a local brand 35

36 What is your positioning? - Price + + Freshness (meat, produce etc.) Family-orientation Seniors-orientation Unusual products Surprising promotions Customer events??? - 36

37 Possible Positioning Supermarket My Supermarket: Tradition Quality and freshness Safety/confidence Kindness Variety of products Identification with neighborhood For all aspects of food, EDEKA is the most competent food retailer - we love food 37

38 The buying side Negociate hard, look for new opportunities for cheaper procurement esp. private label Consider european buying groups (Copernic, Alidis/Agenor; AMS; EMD etc.) Or national ones 38

39 Considerations for FMGC-Industry First of all: define your strategy: - a) clear focus on brands - b) and/or produce private label - c) branded goods business with Lidl f) Means innovation, value proposition, co-marketing, innovative promotions, beyond low price, selective distribution g) Means low cost producer, economies of scale, standardized quality, be fast, ability to copy innovations from brands, broaden distribution, chance going international with discount retailer, but become dependent on discounter, more complexity h) Means low cost, risk of price reduction in whole market, fights with rest of trade, more safely turnover, possibilty to create private label based upon existing brands/products, broaden distibution chance für going internationally, more complexity 39

40 Dealing with Discount Discount uses (brand-)values - build up in years - and sell them cheaper Discount desinvest these long term-values and brandimages and transform them into its price-image* * Wolfgang Gutberlet, CEO tegut (regional food retailer) 40

41 Ideas for FMCG-Industry to support full assortment retailers Be innovative Use thematic promotions, tailor-made promotions, co-marketing Develop own ideas for retailer-individual promotions with focus on your product portfolio and competence Look for Hungary-weeks in western europe 41

42 Again: Key success factors for Aldi s international expansion Know the local market Be cultural sensitive Adapt your concept thoughtfully Logistics Local products Have great staying power (Aldi so far has never left a country, once they are in - contrary to Lidl (Norway) Wal Mart (Germany), EDEKA (CZ) or Rewe/Tengelmann-supermarkets (Hungary) 42

43 means for retailers at the end of the day: Focus on a clear strategy, which goes beyond the day Believe in your own strenghs, but do not become arrogant Use the knowledge of your local market and the needs of your customers to differentiate from competition/discount Care for your employees Develop new ways to communicate with your customer, surprise and let him become enthusiastic Be creative >>become a local retail brand! 43