Aldi, Aldi, Aldi, Oi, Oi, Oi!

I know, from first hand experience that internationalising a business is difficult. I began to reflect on the process as I read about Aldi and what seems to be tremendous success within the UK market as their sales rise 36% to £5.3bn as reported by The Guardian Monday 29th September 2014 http://tinyurl.com/kuz29bw

A German supermarket gaining market share in the UK. Great news for shoppers but what interests me is how they managed it and how that relates to my own experience.

A quick overview of Aldi:

  • Brothers Karl & Theo Albrecht took over their mothers shop in Essen which had been I operation since 1913
  • Upon taking over they found the Aldi chain, 1946
  • By 1960 they owned circa 300 shops across Germany
  • By 2014 the Albrechts had become the richest men in Germany and they had 4,100 stores in Germany
  • These days Aldi has 9,000 stores and operates in 18 countries
  • Aldi launched in the UK in 1989

So, they’ve been around a long, long time. In fact they’ve even been in the UK almost 30 years. I had no idea it had been so long. Undoubtedly they are experts in their field.

They absolutely insist on keeping prices lower than competition. They also curate the products. This means they have thousands less than rivals such as tesco, sainsburys etc. Some may view this bad, uncompetitive practice as they present the customer with less choice.   Yet with concentrated volume on fewer products their negotiating power rises and thus they can leverage prices down. They just make sure they have products customers want to buy.

Not only can they successfully negotiate on prices but also they can amend packaging so they get maximum efficiency from shelf space.

I’d guess they have some long term relationships in place. These ensure consistency, quality and stability, all good things from a growing business.

Mind you, it’s taken almost 30 years for the supermarket to take off and even now they have a low market share %, somewhere around the 4% mark so there is a lot to play for.  Why are they only now a success?

I think it’s down to one main reason, they’ve become part of our culture and so they’re trusted.   Trust is the key factor.  Trust cannot be purchased, it can only be earned.  So how does a business generate trust?  its hard for a domestic business to gain any traction never mind a business with overseas management, culture and approach.

To be trusted you need a good, trust worthy brand.  How to get that?  being familiar helps, but thats difficult for a new business.  One can facilitate the process by ‘feeling’ local.  In order to do that one must under stand local culture.  Yet the best way to be local is really to actually be local, that is, have a long term presence.  So, maybe internationalisation is a long game?

I suspect it is, unless one throws cash at the business and makes a huge marketing splash.  This has to be backed up by an excellent product and customer experience of course!

If I was internationalising a business I’d

1.  Get some local people and build a team, this is the most important factor to me for a whole host of reasons.  Don’t do anything without a core team covering all bases of the business.

2. Ensure everyone knows this is a long game.

3.  Try to ge hold of marketing cash, only start spending when the local team say so, only they know when the product is ready.

4.  Give the local team autonomy, they’re in the best place to make decision.

5.  Don’t go into a market based on size and potential, go into a new market based on chances of success (this requires some savvy analysis!)

Maybe one day i’ll be in a position to internationalise again, I do hope so.  If so, i’ll revisit this post and probably rip it apart.

Heres a recent blog about such things…https://econsultancy.com/blog/65343-how-does-internationalisation-work-for-online-retailers#i.17khn2lw4vex5r

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