Money Aldi stores are “cannibalising” each other amid rapid store expansion, say analysts

12:30  13 february  2018
12:30  13 february  2018 Source:   smartcompany.com.au

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Aldi stores are expanding rapidly in South and Western Australia, but the scale of the rollout may mean the stores are stealing sales from each other . “Despite less than half the penetration of the east coast, a larger than expected number of Aldi SA/WA stores are cannibalising each other , with

" Each new store can take market share without cannibalising other Aldi stores , a dynamic Coles and Woolworths do not benefit from, owing to their existing nationwide footprints and higher store densities."

<span style=The supermarket chain has also committed to store refurbishments and a new fresh food offering in its quest to capture more consumers from Coles, Woolworths and IGA." src="/upload/images/real/2018/02/13/span-style-font-size-13px-the-supermarket-chain-has-also-committed-to-store-refurbishments-and-a-new_540182_.jpg?content=1" />© AAP Image/Dan PeledThe supermarket chain has also committed to store refurbishments and a new fresh food offering in its quest to capture more consumers from Coles, Woolworths and IGA. German discounter Aldi has a strong track record of frightening the big Australian supermarkets with ambitious plans to capture customers, but a recent UBS report suggests the cult-favourite retailer might be eating itself.

The UBS Evidence Lab Grocery Competition Monitor suggests the impact of Aldi’s expansion into South Australia and Western Australia has been less than anticipated, reports The Australian.

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Aldi quietly expanded into other areas of Europe. The company made a big impact in Belgium, where analysts estimated the chain had 260 stores and US billion sales by 1992. Kwik Save helped head off Aldi 's expansion in the early 1990s by acquiring 100 stores .

Meanwhile, UBS analysts estimate around 78% of the chain’s east coast stores and 63% of the store fleets in Western Australia and South Australia are “cannibalising” sales from each other.

“Despite less than half the penetration of the east coast, a larger than expected number of Aldi SA/WA stores are cannibalising each other, with this impact accelerating in the fourth quarter of calendar 2017,” UBS analyst Ben Gilbert said.

The UBS report suggests these figures add further risk to more store openings that Aldi plans to complete on the west coast.

Since 2016, Aldi has championed its national expansion plans, and has previously committed to around 120 stores in the South and Western Australian markets. It currently operates close to 500 stores across the country.

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" Each new store can take market share without cannibalising other Aldi stores , a dynamic Coles and Woolworths do not benefit from, owing to their existing nationwide footprints and higher store densities."

Aldi quietly expanded into other areas of Europe. The company made a big impact in Belgium, where analysts estimated the chain had 260 stores and US billion sales by 1992. Kwik Save helped head off Aldi 's expansion in the early 1990s by acquiring 100 stores .

The supermarket chain has also committed to store refurbishments and a new fresh food offering in its quest to capture more consumers from Coles, Woolworths and IGA.

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Aldi , which currently has 726 stores in the UK, said it planned to open a further 70 this year and would invest a further £459m. Image caption Aldi boss Matthew Barnes said it will continue its rapid expansion .

The German discounter will also benefit from a “clean slate”, with each new store taking market share from existing operators without cannibalising other Aldi stores . The other big risk, Mr Chitterer writes, is that with Aldi having reached “what it typically regards as a critical mass”

It has shown it is a powerful force in the Australian grocery space: since launch in 2001, the retailer has built up to an estimated $11.9 billion in annual grocery sales, overtaking IGA’s takings of $8.4 billion in 2017.

Aldi now has a 13.2% share of the local grocery market, according to Roy Morgan data on consumer spending in 2017.

However, UBS analysts believe the impact of Aldi’s expansion into the South and Western Australia markets will be “less that expected, given the percentage of Coles/Woolworths/IGA stores currently competing with Aldi in SA/WA is not too dissimilar than the east coast”.


Coles supermarket sales slow, adding to Wesfarmers' Bunnings UK woes .
Earnings at the country's second biggest supermarket chain fell 14 per cent.Coles' sales growth has again slowed and its earnings have gone backwards, compounding woes for parent company Wesfarmers, which has seen its half-year profit plunge 86 per cent after its disastrous hardware expansion into the northern hemisphere.

Source: http://au.pressfrom.com/news/money/-55190-aldi-stores-are-cannibalising-each-other-amid-rapid-store-expansion-say-analysts/

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