Aldi Philosophy Grabs Shoppers

Consumer shopping habits have changed the past few years as they search for the best values.

Small format and value-oriented stores have filled that need.

Walmart is rolling out Express Stores in rural and urban markets. Family Dollar plans to open 450 to 500 new stores in fiscal 2012.

Dollar General reported a net income increase of 25 percent to $181 million and opened 301 new stores in the second quarter.

Aldi built a new store in Siloam Springs last year and plans to grow by about 80 stores this year, including a new store in south Fayetteville to replace the one along College Avenue.

And the small-format grocer believes it has the winning formula.

Aldi can save shoppers 30 to 50 percent, said Mark Bersted, vice president of the company’s Olathe Division that includes Northwest Arkansas.

“People are always looking for ways to save money,” he said. “If they can save almost half the cost, it just makes sense.”

The company is privately held and does not reveal financial information.

The grocer specializes in staples such as food, beverages and paper goods. It has six stores in Arkansas, including Fayetteville, Springdale, Rogers and Siloam Springs.

Carol Spieckerman, a Bentonville retail consultant and chief executive officer of newmarketbuilders, agreed that Aldi has a pricing strategy that beats Walmart by up to 20 percent.

“Their prices really do pass muster,” she said.

A consumer study by research f irm Market Force Information earlier this year found Aldi is perceived as being the lowprice grocery leader, followed by Walmart and Costco.

Bersted said his company’s customer base crosses alleconomic, ethnic and age demographics and is growing. “These new customers are saying, ‘I can’t believe I didn’t do this 10 years ago,’” he said.

Beth Gattlin of Springdale said she discovered Aldi about three years ago after hearing a co-worker talk about the store. The wife and mother of two said she makes that her first stop every week when she does her family grocery shopping.

“If I can’t get everything on my list, I’ll run across the street to Walmart,” she said.

Spieckerman said Aldi customers are loyal and many challenge themselves to get all their items at the store.

“That’s definitely something to be envied, especially at a time when shoppers have gone from stock-up trips to fill-in trips,” Spieckerman said, referring to the trend of people purchasing fewer items per trip and just getting what they need when they need it. What Gattlin won’t find are name brand items such as Tide laundry detergent.

About 95 percent of the grocer’s products are what the company calls select brands that are sold only at Aldi, such as Happy Farms and Belmont.

The business carries only one brand of each of the 1,400 core items sold in stores, Bersted said. This sales philosophy allows the grocer to build strong relationships with suppliers because of the high volume of goods it orders and sells from select vendors. The company also sells about 15 “Special Buy” items each week and supplements with seasonal merchandise, he said. The grocer has opened about 80 stores annually for the past few years, said Julie Ketay, company spokeswoman. Aldi has about 1,150 stores in 31 states.

The new Fayetteville store will open in March, Berstedsaid. The store is at 3214 W. Martin Luther King Jr. Blvd., near Liberty Bank and across the street from Lowe’s. It will replace the store at 705 Appleby Road.

Bersted said the new store will be 17,500 square feet, which is larger than the other area stores.

Walmart Express stores average 15,000 square feet and carry about 14,000 items. The average Walmart supercenter is 185,000 square feet. Walgreens average 14,000 square feet while Dollar General is smaller at 7,500 square feet. The College Avenue Aldi opened in 1993.

“Our current Fayetteville store is less than four miles from our Springdale store,” Bersted said. “This provides better separation.”

The new store will employ about a dozen workers, most full-time. Employees from the existing store will move to thenew location.

“We look for where our customers are and we want to be where the consumer traff c is,” said Ketay. “We want to be in shopping districts.”

Local stores are near Walmart, and that is done by design, Spieckerman said.

“Walmart drives a ton of traff c and Aldi dips into that traffc,” she said. “That showshow confident they are in their model.”

The Market Force study showed 67 percent of shoppers choose a supermarket based on location. Second on the list was price at 57 percent, followed by good sales and promotions at 52 percent.

About 20 million customers make the trek to Aldi each month, Ketay said.

Tony Rogers, Walmart’s executive vice president of brand marketing, said earlier this year the retailer averages about 140 million shoppers a week at it’s 4,439 U.S. stores.

Spieckerman said Aldi uses a no-frills approach that made the company a game changer. “They have really worked out the effciencies in the smallformat store,” she said.

The no-frills approach means bagging your own groceries, buying the bags or using empty boxes in the store or bringing reusable bags, having one choice of every product and few workers. Items are displayed on pallets in boxes easily accessible to customers.

Shoppers must pay a quarter to use a shopping cart but are repaid when the cart is returned to the stall.

“We are always looking for ways to take the expense out, but we will never lower the quality of our goods to save money,” Bersted said.

He used bags as an example, saying competitors have to build the cost of bags into grocery prices.

“We are not going to make you pay for something you don’t need,” he said.

One thing that could be added at local stores in the future is beer and wine. Bersted said the idea is being investigated, but no decision has been made.

Local Walgreens and Dollar General stores recently gained approval from the state Alcoholic Beverage Control Division to sell beer.

“We’re always keeping our options open,” he said.