SME's Can Learn from Aldi Model
Aldi's success in winning an international wine award with a $10 rosé highlights five lessons every SME should learn from.
The retailer's UK operation won the International Wine Challenge when the Exquisite Collection Cotes de Provence Rosé 2016 was crowned the best value bottle in the world (although it's not yet available in Australian stores).
While local Aldi operations focus on store refits and an improvement of the “fresh food” offerings in stores, marketing and retail experts say the discount supermarket’s alcohol offerings play a significant role in the brand’s market positioning.
The German retailer’s wine success provides five lessons every SME should study.
1. Leveraging good news
Aldi’s UK arm says it’s also recently won the “Drinks Retailer of the Year” award at the nation’s Drinks Business Awards, highlighting that the discount supermarket does not skimp on “innovation” in its alcohol offerings.
Director of InsideOut PR, Nicole Reaney, says leveraging news like these awards is incredibly important for all businesses, given self-made claims about your business don’t stand up nearly as well in this day and age as someone else saying nice things about you.
“Aldi has been able to reinforce its quality proposition despite lower prices to a public audience. Merit awarded by third parties is seen as more credible than self-made claims and as a wine, this product lends itself to media and social conversation reaching a diverse audience,” she said.
Brand advisor Michel Hogan agrees, explaining that when awards come through that validate a shopper’s decision making, you should be playing on the satisfaction that comes with that.
“One of the hooplas around this kind of award is it does provide a nice self satisfaction bump, so like ‘huh, there you go’,” she said.
2. “Reverse snobbery”
Despite the award-winning wine not even being available right across the global Aldi network, branding experts say there’s a lot to be learned from Aldi’s ability to punch up towards luxury brands.
“It plays into this kind of mean-spirited reverse kind of thing, where people complain about wine snobs looking down their nose at them,” Hogan says.
Marketing Angels director Michelle Gamble says that across all of its branding, Aldi has been able to connect with shoppers and avoid making them feel bad about spending less.
“Some of their advertising in the past has been making a mockery of the snobs out there,” she said.
“Where you have Aldi talking about, ‘Well, we’ve been working hard with our French wine maker’, there’s a sense that they’re trying to leverage these luxury triggers.”
3. Breaking the connection between price and quality
Retail expert and associate professor at Queensland University of Technology Business School, Gary Mortimer, said Aldi has succeeded in its private label offerings in a number of ways.
“They’ve got their private label quality and pricing correct for the market,” he said.
"Not only do private label offerings with fancy branding encourage shoppers to feel better about budget purchases, they also contribute more to the bottom line of an operation like Aldi.
“They have a multi pronged, strategic approach to growth, but they also own the IP on about 95% of their products. They own their own brands and we know that has a good [effect] on margins,” Mr Mortimer said.
Ms Reaney says winning gongs like the International Wine Challenge also breaks any stigma in the customer’s mind about price and quality.
“Some consumers may be hesitant to admit to shopping at low-priced outlets, however this announcement provides reassurance that they are making a smart purchase decision,” she said.
4. Having a broader plan
Despite the buzz around booze, it’s worth understanding that for Aldi Australia, alcohol makes up only a tiny portion of the strategy, Mr Mortimer said.
“It’s certainly not a big space for Aldi here."
While liquor and fresh food do go hand-in-hand as the discount retailer competes with Coles and Woolworths in Australia, a good vibe around some of its alcohol offerings is only one part of a multi-level strategy.
“What keeps you coming back [in store] each week is that every week things are going to change,” Mr Mortimer said.
Ms Gamble agrees, observing businesses should think about the success of some Aldi products, like wine, as a possible gateway for customers into other parts of your business and offerings.
“The strategy to Aldi is get shoppers in the store first [with things like wine], and get them to buy a whole heap of bananas or something."
5. Encouraging customer sharing
Finally, discount retailers like Aldi have been successful in opening up customer conversations about their everyday lives and purchases, experts say.
Prizes like the wine award will only encourage shoppers to be more open in their relationships with the brand, through sharing bargains they find with others, Ms Reaney said.
“I wouldn’t be surprised if more consumers share their Aldi shopping experience and product ‘finds’."
Ms Hogan said that for a lot of discount purchases people make, like a $10 bottle of wine, they’re often not buying “with the expectation it’s going to be spectacular”.
Instead, brands should work to leverage the satisfaction people feel over everyday bargains.
“If you can give people that sense of self satisfaction when they’re going to make a purchase, there can be a flow-on effect,” she said.
Give Local Area Marketing a call on 0404 767 482 to discuss how your business could benefit from applying Aldi's lessons. You could be pleasantly surprised at how easy it could be.