Dive Brief:
- Aldi has partnered with Instacart to offer online shopping and one-hour delivery in the Los Angeles, Dallas and Atlanta markets beginning later this month, according to Reuters.
- The discount chain considers this a pilot run and will carefully consider whether to expand the service to other cities. "Grocery shopping online is a relatively small part of the business, but it is continuing to grow," Scott Patton, Aldi’s vice president of corporate buying, told Reuters.
- The Food Marketing Institute estimates that online sales could comprise 20% of total grocery sales by 2025. Aldi, meanwhile, recently announced it will spend $3.4 billion to increase its store count to 2,500 locations from more than 1,600 currently.
Dive Insight:
With more and more grocers rolling out ecommerce platforms as demand for online shopping grows, it’s not surprising to see Aldi join the trend. As the discounter expands into more markets and goes head-to-head with Walmart — which operates its own rapidly expanding online shopping program — Aldi needs to be competitive beyond its small format, private-label-centric model.
However, for a grocer that’s so focused on its in-store experience and low prices, online shopping could prove to be more of a distraction than a value-add. In addition to its store expansion, Aldi is updating most of its locations to offer a more lively, fresh-focused atmosphere. This stands in contrast to its traditionally bare-bones environment, and is aimed at bringing more shoppers — and more affluent shoppers, in particular — into its stores. Aldi’s low prices and simplified operations, meanwhile, could take an image hit as fees add up and designated shoppers fill up the grocer’s tiny stores.
One major advantage Aldi has here is its private label lineup, which can only be purchased through the company. This includes many high quality on-trend options like the gluten-free liveGfree line, introduced back in 2014, as well as the baby essentials brand Little Journey. Aldi, which carries an assortment that is roughly 90% private label, also offers premium lines like Specially Selected that earn high margins for the company.
In contrast, fellow discounter Lidl has stated it has no plans to offer online grocery shopping. Speaking at a media event earlier this summer, CEO Brendan Proctor said e-commerce isn’t part of the company’s strategy at this time, and analysts interviewed by Food Dive have speculated that Lidl wants to get its store experience right before it worries about adding online shopping.
That approach could change quickly if Aldi’s online test succeeds. While many grocers have jumped on the e-commerce bandwagon, none of the discounters or Trader Joe’s have done so to this point. If a store-brand-focused assortment performs well online, that could alter the strategies of discounters as well as many supermarkets like Kroger, which has grown its private-label assortment in leaps and bounds over the years. It would also bode well for Amazon, which experts say will likely expand its own private-label assortment as well as offer Whole Foods’ 365 brand online.
