What can your business learn from budget supermarkets?
Budget supermarkets are all the rage in the UK at the moment.
Aldi and Lidl are going from strength to strength in the UK, while Tesco has launched its own cut-price retailer – Jack’s – in the hope of gaining a slice of the action.
I have to say, it took me a while to see the merits of budget supermarkets. The first one I visited was Netto, which had a branch in north Hackney when I lived there during the early 2000s.
I hated it.
The shop floor was an untidy free-for-all, there were lots of cheap plastic household items I neither wanted or needed. Worse of all, to exit the shop you had to squeeze like cattle past the tills, where you were continuously watched by a handful of over-zealous security guards.
Netto has since vanished from the UK, but the vanguard of budget retailers is now firmly led by Aldi and Lidl. Indeed, the two of them share the title of Britain’s fastest growing supermarket.
I visited Aldi for the first time last year, and I was pleasantly surprised. Indeed, I’ve been back plenty of times since and will continue to do so.
But why are budget supermarkets growing so rapidly? And what can we learn from them? These are my thoughts on why they are succeeding in a crowded market.
There’s no doubt that budget retailers are selling quality products.
Personally I like the selections of European charcuterie, German Bratwurst, French cheeses and the like. However, even when it comes to essentials, you can expect good quality – for example, Aldi’s ‘Magnum’ washing up liquid is named as a Which? ‘Best Buy’.
Controversially, many Aldi products are sold in packaging that has been accused of aping mainstream brands – but I’ve no doubt that this is part of a strategy to convince customers these are good quality products.
Lower prices are essential to the budget supermarkets’ success. But they understand low prices have to be combined with high quality. I think it is the growing understanding that these retailers’ own-brand products are usually good that is enticing more people through the doors.
My early experience of a budget supermarket put me off because I discovered a shop that was chaotic, badly planned and unpleasant to be in.
That has all changed – shopping at a budget retailer is as pleasant as being in any of the major supermarkets (though sometimes parking can be a bit more of a hassle).
Fine, so low prices and good quality, coupled with pleasant surroundings, that’s not rocket science. But the next insight into how budget retailers work contains a very useful lesson for other businesses.
Budget retailers carry only a fraction of the product lines sold by major supermarkets. They ensure that each product they sell is bought by customers in high volumes, meaning they don’t waste shelf space by carrying less popular products.
They are also very clever to market exactly the right products for any given time of year. At the moment you can pick up a very good electric leaf blower from Lidl for under £40; this offer will be gone in a month or so once these have all been snapped up by those who want to be prepared for Autumn.
This high turnover of each product line means that budget retailers make more profit per square metre of shelf space which this allows them to keep overheads lower by keeping their stores smaller.
In short, what they are doing is making sure every centimetre of their shelf space is performing exceptionally well.
I think there’s a lesson in that for other businesses.
Are you wasting time with products that don’t sell so well and which you have to pay to store until they are sold?
If the answer is YES, it might be worth your time to look at which stock performs best and do all you can to produce or obtain products that perform as well – or better. Ditch the products that are not selling and free up space for those that are.
And this policy does work.
Last week I had a gathering for some friends. I’d promised to make an old school fondue with gruyère, emmental and kirsch. Of course I knew I’d probably have to get some of it from Waitrose and I did.
But I made very sure to visit Aldi first.
In these times, only a fool wouldn’t!
About Ben Locker
Ben Locker is a copywriter who specialises in business-to-business marketing, writing about everything from software and accountancy to construction and power tools. He co-founded the Professional Copywriters’ Network, the UK’s association for commercial writers, and is named in Direct Marketing Association research as ‘one of the copywriters who copywriters rate’.