Leveraging Technology – Aldi

We spent a few days this week travelling through industrial sites in Germany, looking at stores of various DIY operators. The quality of the offering as a whole was outstanding, it was at a minimum as a good as anything we have seen in this sector globally.

What struck me most from this process though had nothing to do with the DIY sector. Site after site there would be a small sign (no large bill board required) directing you to the Aldi store. Invariably the store would be tucked away at the back end of the estate or on a small block adjacent to it.

The Aldi format was absolutely consistent. The stores appeared identical; a small grey building with a dark roof, inside was a single open structure with virtually an identical offering and layout. The first Aldi I walked through I found quite unnerving, it was like I had walked into one of the stores in Australia.

What really stood out as we looked at the DIY sector was the newer stores were much bigger in size and offering. Their standard was good, but there were a number of operators offering a good product. To expand, they seemed to be spending more on their new stores, this increased capital commitment in our minds increases risk, and it also dates their incumbent store base. This contrasted with Aldi who seemed to have an offering that was unique and appeared to enable them to avoid the capex race of having to offer an increasingly large and more expensive format. From an investment perspective this was appealing as it appears to be a format that has a relatively low capital cost and is effective as is; they can just keep doing more of the same.

My initial direct exposure to Aldi was as an Australian walking through their stores as they were being rolled out in Sydney, and trying to dimension what impact this would have on the local retailers. The process of looking at their stores in Germany has given me an appreciation for the consistency and uniqueness of their offering and the power they have from the low capital cost of the format. At a minimum they are outstanding disciplined retailers with an extensive knowledge base of what works in their offering, what they appear to be doing in Australia is leveraging this knowledge base and building out more of what they know so well.

Aldi Store Locations