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Aldi is set to boost its relationships with local suppliers via a new small-scale supplier scheme.

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Lidl US has started to offer online shopping in partnership with Shipt in Greenville, NC, according to reports in the Upstate Business Journal.

Membership based delivery model

Shipt is a membership-based grocery marketplace that delivers fresh foods and household essentials from a range of retailers. Members pay an annual fee of $99, and order via an app, providing unlimited free delivery for orders over $35. The company uses a network of ‘Shipt Shoppers’ to pick and deliver orders.

Fees and pricing model may deter discount shoppers

This is a major development for Lidl, which recently opened its 39th store following its US launch earlier this summer. While this will potentially extend its reach with new customer groups, many discount-focused shoppers may be deterred by both Shipt’s membership fee and prices. These can vary from grocery store prices by an average of $5 on a $35 order. The results of this localised test are likely to be analysed before any decision is taken on extending the program to additional markets.

Aldi partnering with Instacart for delivery pilot

This year, several retailers have started to offer online grocery shopping in the US. Many have partnered with third-party companies such as Shipt to build a presence quickly in this key growth channel. These include Publix, Wegmans and Aldi, Lidl’s main discount competitor, all of which have partnered with Instacart, with the discount retailer running pilots in Atlanta, Dallas and Los Angeles.

Discount and online set to be the fastest growing channels in the US

Lidl’s and Aldi’s ecommerce initiatives demonstrate the pace of change within the discount and online channels in the US. Both are forecast to be the fastest growing channels over the next five years, delivering growth of 7.6% and 18.1% on a CAGR basis respectively through to 2022. While offering online shopping is not typically part of the hard discount offer, the moves by Aldi and Lidl into the channel also highlight the growing focus retailers are placing on improving convenience and ease of access.

This week Aldi held its first trade briefing in the UK. On the day, Aldi described its future ambitions in the UK, where it has established a significant presence in recent years. This included a continued commitment to the business model which has supported its growth to date:

  • Consistency, underpinned by quality, service and availability
  • Simplicity, through everyday low price, no gimmicks and leaner head office operations compared with competitors
  • Responsibility, supported by adherence to GSCOP, sustainability and ethical trading

These commitments offer Aldi’s suppliers three clear benefits – partnership, certainty and growth.

Growing its network

Aldi also stated its commitment to investing in three key areas to support its growth strategy. Firstly, its stores and distribution network, which will help it to fill geographic gaps in its portfolio and to better service new and existing stores.

People are key

Secondly, it’s investing in people. Aldi is investing in apprenticeships and placement years and has set up the Aldi Academy in Bolton.

Thirdly, Aldi has just started a major project to advance its IT systems. It’s investing to be “ready for the future”, and the initiative will look to address data sharing and forecasting amongst other things. This is likely to be of interest to Aldi’s many suppliers and marks a move towards deeper supplier partnerships and a less transactional approach.

Managing availability

Aldi emphasised the importance of on-shelf availability on the day. Its limited range makes it crucial for stocked products to be on shelf and available for customers.

Aldi has some interesting ways of managing this challenge. It operates a dual/multiple-supply model on many of its products, with products manufactured and supplied by more than one business. Typically, supply is split by region and offers Aldi an “insurance policy” against supply issues, which have a disproportionate impact on Aldi’s stores due to its limited product range.

The use of mixed cases containing complimentary products is another interesting feature of the Aldi supply chain. Aldi uses these to add value and improve product choice for customers. By operating in this way, it manages to keep the number of case variants it stocks to a minimum, helping maintain its efficient supply chain.

These two strategies offer potential Aldi suppliers opportunities to engage with the business. The dual-supply strategy, in particular, means suppliers can manage their obligation, building the necessary capability in a more controlled way.

To find out more about the Aldi operation, take a look at the Aldi supply chain snapshot.

Aldi has announced a major new distribution centre in the south east of the UK.

89,000 sq m facility

The discounter has submitted a planning application to Bedford council to build an 89,000 sq m DC in the area. The new facility would be its 12th in the UK, offering 400 jobs. The £75m development will serve Aldi’s stores in Bedfordshire, Buckinghamshire and Hertfordshire. It builds on the £2bn Aldi’s invested in the last five years in new and improved stores and DCs – two warehouses in Sheppey, Kent and Sawley, Derbyshire, are currently under development.

Investing in operations

Aldi UK and Ireland CEO Matthew Barnes commented: “More than half of all UK households now regularly shop with us and many more prospective customers tell us they would switch supermarkets if there was an Aldi nearby. This gives us the confidence to continue investing in our operations and infrastructure.

“Our plans are more significant when viewed against the changes taking place in the UK grocery market. At a time when many of our competitors are scaling back, we continue to scale up our operations across the country.”

Presentations

17/03/2017
All you need to know about Aldi’s supply chain in two slides, including supply chain strategy, latest network developments and tips for greater collaboration.
20/09/2016
The discounters are looking for growth – in some markets this entails rapidly expanding store numbers and investing in online, in others product categories are growing and new convenience style shops are opening. This presentation looks at the latest developments and innovations in discount retailing and the impact each has on supply chain and the discounter operating model.
11/07/2016
Every week we publish the key news stories from the international FMCG supply chain. Here we look specifically at what we’ve seen from retailers in the first half of 2016 in the following channels.
17/08/2015
Two Sisters Food Group (2SFG) has made significant progress to develop a more collaborative relationship with Aldi and Lidl. The companies have worked on a number of supply chain projects, helping to drive efficiency and improve capability, marking a collaborative change in the relationship.

In our third benchmarking release, we explore cost to serve. The ability to measure how much it costs to service customers is vitally important to ensuring profitability. 

Every half year we review the strategic developments in the supply chains of FMCG retailers. Check out what trends we've seen in H2 2015.

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A practical one day workshop for all roles in suppliers, to help develop your understanding of the vital part that supply chains play in underpinning FMCG businesses.