Click and collect latest tactic in Aldi’s strategy for expansion

Almost everybody agrees that 2020 was a dog of a year. More than 2,200 of our people died with Covid-19; up to 30 per cent of the workforce was unemployed at various stages; a black hole of about €20 billion opened up in the State’s finances; and it was mostly illegal to go to the pub to drown our sorrows. Talk about a total crisis.

This must present a quandary for supermarket managing directors because although it was a terrible year for most businesses, it was a record-breaking one for grocers. Supermarket sales rose about 15 per cent to near €13 billion. People queued to get into shops to empty the shelves. Grocery workers were catapulted up the rankings of public esteem and, alongside healthcare workers, were lauded for keeping the nation afloat.

Performance

Niall O’Connor, group managing director of Aldi Ireland, has the good sense and taste not to punch the air at the performance of his business. But even through the digital barrier of a Microsoft Teams call, he virtually radiates a sense of satisfaction from a gruelling but successful 2020. The last major crisis between 2008 and 2013 transformed the fortunes of Aldi in Ireland. Could the pandemic spark another epochal shift to push the German discounter onto the next level?

“We will know more when we have put Covid behind us. I actually think we are heading for a recession. I hope it isn’t a long one but we’ve had a few knocks now, and the extraordinary measures from Government are masking the true extent of it,” he says, clearly unburdened by any spurious desire to cheer up his poor inquisitor.

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“I think a recession could come quickly when those measures are unwound. We’re in a good position to rebound but we will dip first, and that will play into the hands of Aldi. It could be a replay of the last crisis which helped us to accelerate.”

The company’s numbers look good for now. Aldi, which employs 4,500, has 145 stores in the Republic and another six will open this year. Its latest rolling 12-week market share from Kantar was about 11.2 per cent, although its annual average was closer to one eighth of the market, suggesting sales of near €1.6 billion.

Aldi says sales rose by 15.2 per cent, meaning it didn’t lose annual share to its rivals. It recently announced 1,050 new jobs for this year.

Opportunities

“We’ve 145 stores now but I think Ireland has another 45 or 50 left in it. There are huge opportunities in Dublin. We have stores in the city that are trading really hard. We have 23 in Dublin – Bayside will open soon. There’s potential for maybe another 20 or more. But trying to find 2.5 acre sites where we can drop a perfect Aldi store with 120 carparking spaces – that is difficult at the best of times.”

O’Connor, who ascended to the top job at Aldi Ireland at the beginning of the pandemic, facetiously describes himself as an Aldi “lifer”. But actually he spent most of the first decade of his career climbing the retail ladder elsewhere, with stints in Marks & Spencers and Avoca Handweavers.

After growing up first in Wicklow and then Cork, he left for Britain at the age of 18 with the aim of becoming a professional golfer, having secured an apprenticeship in Warwickshire.

He deferred it for a year to do the first year of a chemistry degree at the University of Greenwich, before scrapping the golf plan altogether and finishing out his education.

By then, he knew he didn’t want to work in chemistry and landed a role at M&S on a graduate buyer scheme. Hoping for menswear so he would be weighed down with free clobber, instead he got womenswear and became a buyer of ladies skirts.

“I didn’t exactly have the legs for them,” he jokes.

Expansion

At the age of 27 he moved back to Ireland, just as the Celtic Tiger was taking off in the late 1990s, and took a job with Avoca where he helped to spearhead its retail expansion.

Three years later, and just married, he spotted an ad for a new kid on the local grocery retailing block, a German discounter with a curious name that meant little to most Irish people. Aldi was opening its fourth store here at the time, but O’Connor spotted its potential.

“My eyes had watered when I came back from London at cost of living here. Aldi was pitching price and quality in a market where people had been ripped off for years. I thought if they can execute this well, it will change the face of grocery retailing in Ireland forever. It was far-fetched , but actually I think we have managed it.”

Its German discounter counterpart, Lidl, might also make the same claim. As is usual with this pair, there is very little between them.

Aldi, like Lidl, mostly eschewed online trading since it entered the Irish market as it didn’t want to complicate its finely drilled operating model, which is built on streamlined processes and fine margins.

The pandemic has made it alter its approach. Last summer it launched home delivery with a slimmed down range of products with gig economy player Deliveroo as its partner, after Lidl launched home delivery with the Buymie app in 2019.

Aldi is now jumping ahead of its rival with the launch next week of a new click and collect service. It will start slowly, initially fine-tuning it at just one store: Sallynoggin in south Dublin. It has about another 15 stores in mind for the next phase. Aldi is also currently launching click and collect in the UK, where it is charging £4.99 for pick-up slots.

“We will monitor how it goes in Sallynoggin first. We need to understand what our customers think. We think they will be really impressed. Within weeks, we will gradually add more stores. Long before the summer, we should be able to scale this up very quickly, depending on demand.”

Order

Here is how the service will work. Aldi has built its first e-commerce site for the Irish market. Its delivery service is handled by Deliveroo’s system and Aldi’s usual Irish site can’t handle web transactions. The new click and collect site will be accessible via a link from Aldi’s other web presences.

Customers place their order at least one day, and up to one week, in advance of pick-up. They will be able to choose from almost its entire range of 1,800 products, although its centre aisle special buys initially will not be available.

Regular orders can be repeated at the click of a button. O’Connor claims the process is fast. The customer selects a day and a time for pick up at a participating store.

That morning, Aldi staff will pick the customer’s groceries from the store’s warehouse and hold the various portions of it in the correct temperature zones – some in the fridge, fresh goods in a chilled zone, others in the freezer, the rest at room temperature.

When the customer arrives, they pull into a designated parking bay and text a number provided with their order. This alerts staff that the customer is outside and the order is scooped together and brought to the customer’s car. ID will be sought for any alcohol, before the groceries are placed in the boot. As the customer drives away, their credit card is charged.

Measure

Is this simply a contactless pandemic measure, or is Aldi launching click and collect for keeps? It depends how popular it is: “We are gearing it up in a way that it needs to be able to work long term. But we will be led by demand. If the demand is that it should be every store, we’d look at that. We are open minded.”

O’Connor repeatedly highlights that, despite the general perception that internet retailing conquered all in 2020, online grocery sales rose from only 2.8 per cent of the market to 4.1 per cent.

“More than 95 per cent of the market is still in bricks and mortar. So we are still going hard in expansion of our physical store network. During the pandemic, it has become apparent that people actually like to go grocery shopping. It has a new found purpose in society. It will be interesting to see where that trend goes.”

The State’s chief medical officer, Tony Holohan, this week asked shops to redouble their anti-virus safety measures, as the more transmissible British variant complicates the public health response. O’Connor says only a “small number” of Aldi employees were infected and all recovered. Still, he would like to see grocery workers bumped up the priority list for vaccines.

Priority

“Everybody realises the huge efforts that have been made by the grocery workers. In light of grocery staff providing such an essential service, I think they should feature on that priority list and be a little closer to the top. Certainly not ahead of the elderly and vulnerable. But they should be higher up and I am hopeful that the government would consider that.”

In any other year, preparing for a hard Brexit and its impact on supply chains would have been enough to challenge any grocery chain. But 2020 was no ordinary year, and Brexit took a backseat to the pandemic for most of the period.

When Britain’s transition ended and it left the European customs union in January, Aldi says it coped with the cliff edge impact by massively inflating stock levels and switching some product lines to Irish suppliers.

With the exception of the odd issues around certain products such as falafel, its stocks held up and it avoided shelf shortages. O’Connor acknowledges, however, that Brexit may push up some prices.

“I couldn’t sit here and say to you that prices are not going to increase. What I can say is: we’re doing our damndest to make sure they don’t. But if they do, we still won’t be beaten on price.”

He says Aldi spent €850 million last year with Irish suppliers, and expects that to rise to €1 billion this year. This shift to more local products ties in neatly with its ongoing Project Fresh programme of internal refits of stores to emphasis its range of fresh produce, healthy food, organics and high-end meats.

Acknowledgement

Keen to highlight its Grow With Aldi scheme for promoting Irish suppliers, O’Connor name drops a battery of local brands and products: Healy’s Honey in Ballincollig; Silver Pail ice cream from Fermoy; Marie’s Brown bread; Aldi’s award winning ribeye steaks ... there are too many to name here.

Even though Aldi Ireland is a German retailer, he says, the fact that the operation is run by Irish people means it has morphed into an “indigenous retailer”. That certainly suits the company’s publicity strategy, but it is also not too far wrong. Aldi, along with Lidl, is now embedded in the Irish grocery establishment, no longer the upstarts.

As if to prove its status in the nation, O’Connor recalls how when he recently met Leo Varadkar for a jobs announcement, the Tánaiste recorded an impromptu video message for Aldi’s staff, thanking then for their services to the Republic during the pandemic.

“We sent that around our business. What a shot in the arm for the staff. 2020 has been a hard slog for everybody. Negotiating the pandemic was an incredible feat for our industry. It is nice to see acknowledgment of that.”

CV

Name: Niall O'Connor

Job: Group managing director of Aldi Ireland

Age: 50

Home: Naas

Family: Married to Aoife with 2 children

First job: M&S ladieswear buyer

Something about him we might expect: He likes cooking at home

Something about him that might surprise: He once wanted to be a pro golfer