Dr Heiner Evanschitzky, professor and chair of marketing at Aston Business School, says the big four supermarkets are fighting a losing battle when it comes to trying to beat Aldi.
Dr Evanschitzky’s comments follow news that the discounter has posted a whopping 65.2% rise in pre-tax profits to £260.9m for the year to 31 December 2013, with group turnover rising over 35% to £5.27bn.
The profit rise comes as Aldi and fellow German discount chain Lidl take an ever-bigger market share from Britain’s big four supermarkets – Tesco, Asda, Sainsbury’s and Morrisons.
Dr Evanschitzky said: “This is a question of efficiency and meeting consumer demand without the frills. A typical Aldi stocks around 2,000 products, whilst a typical big four retailer stocks 10 times as many. This bulky, outmoded style means that the big four struggle with an underlying cost-base and will never be able to compete on price.
“Additionally, Aldi mostly stocks own-label products, cutting out the costs that the big British supermarkets have to deal with. And, of course, Aldi is a family-owned business, meaning that it doesn’t have to report to shareholders, allowing them to take a more long-term strategic view.”
Aldi’s meteoric rise in Britain mirrors its success in its native Germany, where traditional retailers have tried – and failed – to fight Aldi on price for the past 20 years.
Dr Evanschitzky said: “The bottom line is that the big four have no chance to compete on price. Aldi will always be able to cut more.
“Instead of competing on price, retailers need to be more creative, and not just on price. Quality, convenience, location, store appearance and service are all vital to keep today’s shopper interested. The discount brands will always be there for the discount shopper, but a significant chunk of UK consumers value quality and service above just what’s on the price sticker. Don’t fight Aldi on their home turf, fight them on your turf – give shoppers more choice so everyone gets the supermarket experience they’re looking for.”