Aldi says it strives to be consistently 20 per cent cheaper than supermarket rivals Woolworths and Coles, as it seeks growth through more customers rather than new stores.
Facing a public hearing for the Australian Competition and Consumer Commission’s inquiry into supermarkets on Monday, representatives of the German multinational said a smaller, more effective range of items allowed it to beat the industry’s power-players on price.
The discount supermarket is the closest competitor to Coles and Woolworths yet distant, attracting about 10 per cent of the market with fewer than 600 stores, while the dominant pair together control about two-thirds of supermarket sales nationwide.
The consumer watchdog previously noted it took two decades for the overseas chain to establish its fractional market share in Australia, suggesting issues with competition.
Planning and zoning laws posed development challenges for new stores, while the inquiry was told existing tenancy agreements with other supermarkets often stifled expansion into new shopping centres.
According to national buying managing director Jordan Lack, that denied more customers the opportunity to shop with the brand and save money, as it benchmarked between a 15 and 20 per cent gap with its major rivals.
“We are looking for our product range we stock to be as efficient and as effective as possible … we don’t want to have a long tail of products within our range,” Mr Lack said.
“We do have products which vary in regards to the gap, but it’s across the entire assortment on average that we have that 15 to 20 per cent gap.”
Ridding Aldi of a lingering “stigma” that lower price equated to lower quality remained a challenge, Mr Lack said.
“The perception of our quality and the quality of our exclusive brands has increased over time, so we’re seeing that perception metric tick up, but there is still a lack of understanding,” he said.
“There is a degree of stigma which still hangs around from the old Home Brand or private label days … what is encouraging for us is those customers who shop our range have a higher impression of quality than those who don’t shop our range.”
The chain was still growing, with some help from government changes to foreign-investor requirements and restrictive lease covenants, but the rate of new stores opening was slow, Aldi managers said.
Those hoping for an Aldi alternative could be waiting some time, particularly outside major cities.
Expansion into Darwin, as some locals have called for, was not commercially viable, Mr Starr said.
Aldi has no stores in Tasmania because the company seeks locations close enough to one of its eight distribution centres for trucks to deliver and return in one shift.
A “bespoke logistics solution” was the exception for a recently opened Townsville store serviced from a distribution centre near Brisbane, more than 1300km away.
But it has proven popular, with Indigenous Consumer Assistance Network financial counsellor Martina Kingi telling an earlier hearing Townsville shoppers were “taking to having another option”.
Mr Lack said 85 per cent of the nation’s population lived within 20 minutes of an Aldi, but its customers were not all the same price-focused consumers as when the chain launched.
Officials for Coles, Woolworths and Metcash – the parent company of IGA – will front the commission’s inquiry in November.
A final report is due in February.
The federal government will provide a $30 million funding boost for the commission to continue patrolling the supermarket sector.
It has also proposed changes to merger laws and a mandatory food and grocery code of conduct, carrying multimillion-dollar penalties for serious breaches.
