German discounter Aldi has underlined its UK ambitions with expansion plans that outstrip those of other supermarkets, opening almost twice as much new store space this year than its nearest rivals.
Aldi, which arrived in the UK a quarter of a century ago, will add just over a million square feet of floor space, around 60 stores, in 2015. This is a bigger expansion than Sainsbury’s, Morrisons and Tesco put together.
Fellow German budget supermarket Lidl will also be adding 340,000 sq ft of new space, twice Tesco’s planned growth for 2015.
Aldi’s expansion plans underscore the changing shape of the sector, the overall growth of which will come mainly in smaller stores as the shopping habits of UK consumers shift from weekly trips to big out-of-town supermarkets to more frequent visits to mid-sized or local stores.
According to the research from the commercial property industry IPD and Colliers, reported in the Sunday Telegraph, Aldi’s planned extra 1.02m sq ft will dwarf the 600,000 sq ft planned by Asda. Among the rest of the big four, Sainsbury’s will add 450,000 sq ft, Morrisons 220,000 sq ft and Tesco 170,000 sq ft. Marks & Spencer, whose smaller Simply Food stores have been a success, will be opening 600,000 sq ft of extra retail space.
The big four supermarkets have seen their domination chipped away as disappointing profits have led them to rein in planned openings, with Tesco in particular hitting troubled waters: profit warnings and accounting shortfalls last autumn were followed by news that 49 planned stores would be scrapped and that 43 existing shops would be closed.
James Watson, head of UK investment at Colliers, told the Sunday Telegraph that traditional supermarkets have been undermined by shoppers’ desire for smaller basket-based purchases combined with the growth of online grocery shopping. This has eroded the lucrative profits generated by big weekly trolley shops at larger stores. Analysts say the chains have been effectively subsidising customers who order via the internet, with delivery charges rarely covering the costs.
However, Aldi is also considering a move into online delivery, despite its apparent conflict with the German retailer’s focus on a simple, low-cost business model. The UK, whose 5% proportion of grocery shopping done via the internet is relatively high in Europe, is likely to be the first market where Aldi would introduce such a service.
Lebensmittel Zeitung, a German trade journal, said Aldi South, which runs Aldi’s UK and Irish businesses, might go online in other countries including Germany, while sister company Aldi North was considering a similar move in Spain and Portugal.
The German incursion into the big four’s territory is continuing apace, with Aldi reaching a 5% market share by the end of last month, according to data from Kantar Worldpanel, and rival Lidl growing to 3.5%. Last November, Aldi said it would create 35,000 jobs in Britain through its plans to have 1,000 UK stores by 2022, double its current number.
Aldi’s position as a mainstay of the UK market has been confirmed by a commercial deal announced last week, when it was named as the official supermarket sponsor for the British Olympic team for the 2016 Games in Rio, in a £10m deal.