Hard Discounters Go Digital

Hard discount groups in Europe are gradually entering the online grocery space. Aldi will start selling wine online in the UK and Lidl might follow suit, also in other countries. This means that both traditional food retailers as well as suppliers such as food companies need to raise their online capabilities in order to deal with the new situation.

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A few years ago it was unthinkable that German-style hard discount (HD) food retailers like Aldi and Lidl would even consider selling their food and non-food products online. Reasons named were that clients would prefer to come to their stores and because costs for running an online platform would be too high. Today’s reality is that more and more hard discounters are entering the digital space via both food and non-food pilots in various regions. And that is not all; Aldi is also launching an online music streaming service in Germany and a YouTube cooking channel in the UK in an effort to connect with customers.

European hard discount groups like Aldi, Biedronka, BIM, Lidl, and Netto are renowned for their low cost culture and efficient logistic and store operations. With product assortments seldom reaching more than 1,500 items, complexity is indeed minimal. Depending on the region of operation, most of these groups are also still in high growth mode through a combination of positive same-store-sales growth and store openings. Noticing the growth potential as a channel,  a few of these groups have already entered the online channel in a limited number of regions in the past few years with ranges typically consisting of non-food – the weekly promotional offers – and in some cases wine, coffee, pet food and health & beauty. None has gone mainstream though. 

With HD groups slowly learning the tricks of the trade, the time seems ripe for a clear step up in terms of activity in this fast growing retail channel. Aldi, which has been piloting selling alcoholic beverages through a dedicated website in Australia, is going to launch a second online operation in the UK. Initially, Aldi will start selling wine by the case. By Spring 2016, Aldi will extend the pilot with the sale of non-food promotions. Competitor Lidl has also hinted at running an online wine operation in the UK soon. Besides generating incremental sales, these HD groups are gradually learning how their clients shop online and how the rules of picking and logistics differ from the current situation. 

Over time we would expect many HD groups to start selling their entire ambient and fresh food ranges online. Potentially, they could extend their online offerings beyond their store assortments. With more wine and frozen foods offerings for example. With quality of their private label products commonly matching that of their branded equivalents, or occasionally even surpassing these, online HD groups could also become more prominent competitors for Foodservice and Cash & Carry operators. After all, nobody sells good quality edible oils, rice, sugar and other basic foods cheaper than HD groups. 

With media reports about Lidl soon to launch in The Netherlands and Belgium too, traditional supermarket operators have no time to waste to invest in their online capabilities, while suppliers such as food companies need to raise their online capabilities if they want their products to be sold online as well. 

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