Aldi’s new ‘eco concept store’ is about much more than saving energy

On 5 April 1990, a new grocery chain arrived in the UK in the form of a 2,000 sq ft cash-only store in Birmingham.

Despite its bare-bones style, with strip lighting, products stacked on pallets, and only three staff on hand to assist, its low prices ensured it was packed with shoppers within the hour.

Aldi’s UK operation has grown somewhat in sophistication and complexity since then, to the extent that last week it opened an ‘eco concept store’ in Leamington Spa. Designed to reduce energy demand by 57% compared with a ‘normal’ store, its features include timber fibre insulation and a partial green roof.

It also has a refill fixture dispensing nuts and coffee, and separate recycling points for soft plastic, medicine packets, batteries, coffee pods and cosmetic packaging.

But this is not just about reducing carbon consumption, lowering energy bills and giving customers some more sustainable options.

As Aldi UK & Ireland announced its 2021 financial results last week, its CEO Giles Hurley revealed how, as well as opening new stores, it had an “extensive” relocation programme, closing legacy sites – some of which are 30 years old – and opening bigger ones nearby.

This is one of those, built to replace an existing, over-trading Aldi store on an adjacent site. It will bring customers “the latest Aldi shopping experience”, according to an architect’s report in support of the planning application. It has “wider aisles, additional car and cycle parking capacity to meet the current demand, a refreshed modern internal environment, and a small addition to the product offering”.

It’s got a bigger shop floor too, at 14,000 sq ft.

The results of Aldi’s latest ‘project fresh’ format are good, according to Hurley, with stores performing “at a significantly higher level” to those they replace.

That’s not at all surprising. The cost of living crisis has already helped Aldi take Morrisons’ place as the UK’s fourth biggest supermarket, and that’s despite the discounter’s store opening programme faltering somewhat. It had aimed for 1,000 stores by next year, but now doesn’t expect to get there until 2023. In the meantime, the relocations give it another way to comfortably accommodate more customers.

But it is not without risk. The first reason cited by Hurley for Aldi falling behind on store openings was planning delays, and it will not help that, like Lidl’s, its plans are beset with objections from rival supermarkets, as revealed by The Grocer last week.

Lidl and Aldi define themselves as limited assortment discounters (LADs) in their planning applications. It can stave off the objection that an area already has too many supermarkets, or that they may harm town centre retailers.

The Leamington Spa Aldi architect’s report, for example, says: “Aldi stores do not sell lottery tickets, cigarettes or stationery. Nor do they offer a butchery, fishmonger, pharmacy, a greengrocery service, delicatessen, hot food counters, photo processing, or other concessions frequently found in other supermarkets. Aldi’s customers will continue to use other shops and stores for these items. Aldi stores do not, therefore, compete directly with the specialist food shops, newsagents or durable goods stores in their locality and are complementary to the existing trading pattern within the area as currently demonstrated.”

Contrast that with this, from Giles Hurley last week: “Our basket now is bigger than it was before the pandemic, demonstrating our existing shoppers are consolidating their shop at our store. They’re spending more, they’re buying more and they’re using us as a first-stop shop.”

In other words, customers are not shopping elsewhere, photo concession or not.

To aid their planning disputes, rivals would like to argue the LAD definition no longer applies to the new-look discounters. And indeed, Aldi’s 1,800-plus products – compared with 600 back in 1990 – have seen it morph into a ‘limited assortment supermarket’  or LAS, Shore Capital analyst Clive Black recently told The Grocer.

Relocated, bigger stores are one way for Aldi to welcome more new customers and grasp the growth opportunity of the cost of living crisis. But it also needs to be careful not to hand rivals ammunition that could be used to further disrupt its wider estate growth programme.