Brand equity is dead. Long live Aldi!
The truly challenging aspect of the recession currently engulfing us is not its depth. It’s the width. Despite the forlorn hopes of politicians and economists, there is no upturn in sight. The Olympics bubble has inflated and deflated to leave us back where we started the year.
Given the size and pain of the recession, some might dismiss the importance of marketing or brands at the moment. But like any long-term change in temperature, some species will always adapt and eventually thrive in the altered conditions.
Take Aldi. Newly released figures for the privately owned German retailer confirm it has had an astonishingly successful 2011 with sales up by 30% and profits up almost five-fold. It would be easy to explain away these figures by claiming they were the result of new store openings but, according to Aldi, most of its 2011 sales growth came from an increase in same store sales. Existing Aldi customers spent more, while more than 1 million customers switched from the traditional British supermarket brands to their German rival.
And that was just 2011. The secretive retailer won’t reveal its performance this year but according to Kantar Worldpanel, Aldi’s sales grew again by a whopping 27% in just the last three months. According to joint managing director Matthew Barnes: “We have moved from being a top-up shop to being somewhere that people can come and do their main weekly shop. Market data shows we’re the only supermarket where people are putting more items in their basket than they were a year ago.”
We may have three months left in 2012 but I’d recommend Aldi as brand of the year. And like any brand champion there is much we can learn from its success. First is focus. While other retailers, most notably Tesco, fell foul of forgetting their core business at the expense of sales and profits - Aldi has retained what can only be called a maniacal focus on the business it is in.
Aldi’s positioning around high quality products at lowest possible prices and with a no-nonsense approach has also been executed incredibly well. It would be easy to walk into an Aldi store and criticise its drab décor and bland, price-based visual merchandising as being poor marketing. But these criticisms mistake the nature of positioning - Aldi’s store environment is just as successful as Chanel’s or Pret A Manger’s in communicating to consumers what the store is all about. It’s simple. It’s price driven. And perhaps most importantly it’s efficient - the average Aldi is around 8,000 square feet which makes it a far simpler (and more profitable) environment to do your shopping in.
The fastest growing retailer in Britain is living mostly without the help of brands. Brand equity be damned!
Aldi’s positioning is consistent worldwide - but the brand has also exhibited the ability to alter its approach to fit local market tastes here in the UK. In 2009, Aldi’s sales stalled and the new leadership team spent considerable time understanding the British consumer and adapting the Aldi offer to fit their needs. In Germany, for example, shoppers are happy to wait in line for extended periods of time in Aldi to pay for their goods but this was a major issue for British consumers and so it introduced a “one-past-the-belt” system. There is also an increased focus on British grocery foods to please local consumers.
The other big alteration is the communications approach. Aldi has a policy of not advertising in its home market of Germany - believing that a weekly newsletter more than suffices. In the UK, however, consumers are used to learning about their brands via the mass media and much of Aldi’s success in 2011 can be attributed to its TV campaign: ‘Aldi. Like brands only cheaper’. Designed by McCann Manchester, it claims that Aldi’s private label is just as good as major brands but with the added attraction of being significantly cheaper.
The campaign is crucial to recruiting new consumers because Aldi’s lower prices depend on an inventory that is almost exclusively private label led. While most British supermarkets stop their store brand sales at around the 50% level, Aldi is comfortable with 95% of its range being private label. And that might be the most important learning of all for major branded manufacturers - the fastest growing retailer in Britain is living without most of them. Brand equity be damned!
But perhaps the biggest lesson of all we can learn from Aldi is that some brands just fit certain situations. The Aldi brand first blossomed in the sparse climate of post-WWII Germany. It’s a brand for our times. And the more Aldi communicates and delivers its Aldiness to Britain, the more it is likely to grow. “We’ve seen a shift in the socio-demographics,” says Roman Heini, the other joint managing director of Aldi UK. “Obviously we have kept the existing customers so we still have the C1, C2 and D customers but we now also see more A and especially B customers in our existing stores and also in the stores we have opened this year so far.”
It’s an ominous trend for a brand that seems unstoppable in today’s recession-hit Britain.