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How Aldi plans to disrupt many ASX retail shares

There is talk that Aldi is thinking about a plan to disrupt many ASX retail shares including Woolworths Group Ltd (ASX:WOW).
The post How Aldi plans to disrupt many ASX retail shares appeared first on The Motley Fool Australia. –

There is talk that Aldi is developing a plan to disrupt many ASX retail shares.

A few years ago there was commentary that Aldi was going to continue to hurting supermarket businesses Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW).

Our local food retailers were finding it tough – Aldi was expanding its number of stores and the lower prices made Coles and Woolworths think they had to compete on price too.

But then Woolworths brought in a new CEO and concentrated on other things that consumers wanted like store locations, convenience options inside the supermarket, a greater range of products and online delivery. It didn’t have to just be about the lowest price. 

COVID-19 has completely changed the retail environment. Companies need to have compelling online offerings to bring in higher levels of growth. And the growth is there for businesses that can capitalise on it.

In the recent reporting season, plenty of businesses reported high levels of online growth. Coles consumer online sales went up by 61% and Woolworths online sales grew by 92%.

Other sectors also saw strong online growth. JB Hi-Fi Limited (ASX: JBH) experienced online sales growth of 161.7% to $678.8 million and Adairs Ltd (ASX: ADH) saw the Adairs division grow online sales by 95.2%.

Aldi is planning to do online

According to reporting by News.com.au, the major German retailer is trying to find a solution for an online shopping option. It hasn’t quite found the desired model yet, which is why there isn’t online shopping already.

News.com.au quoted an Aldi spokeswoman:

Currently, the trade off to offering online shopping for the grocery sector means costly overheads. It’s no secret that we are different from the competitors. These differences continue to be the reason millions of Australians choose to shop with us every week. Once we have a business model to deliver online shopping, without compromising on the price of our products, that is when we will act.

Before the COVID-19 pandemic came along, online shopping wasn’t a popular option with supermarket businesses. They would have to pay someone to walk around a supermarket picking the order, whereas customers choosing for themselves are doing it for ‘free’. Unless you charge a hefty delivery fee, it’s an costly operation.

One potential solution is ‘dark stores’ where no customers are allowed into the building, it’s purely just for online order pickers. Both Coles and Woolworths are trying these out, though with a very limited number.

It will be interesting to see what model Aldi tries to pursue. It saif that 2020 was still a good year of sales, despite the shift to online shopping for many customers.

You’d think Aldi will do something eventually if more and more customers only want to do their grocery shopping online rather than in-store.

Aldi has small stores to save on costs, such as rent, which helps margins and allows it to offer lower prices to customers. However, an online store might allow the business to offer a wider range of products at once – or at least more of its special buys.

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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends ADAIRS FPO. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool Australia has recommended ADAIRS FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post How Aldi plans to disrupt many ASX retail shares appeared first on The Motley Fool Australia.

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