In a fundamentally conservative environment such as German food retail, change and transformation have mostly come at a moderate pace.
‘Big bang’ moments such as the appearance of self-service formats (inspired by the Americans), the introduction of the first hypermarket (following the French) and the move to scanning technology, which was impossible to avoid, have therefore been the exception – and we are still waiting for online grocery retail to come out of its tiny niche.
If you are looking for a typically German retail story, it’s best to look at the discounters.
Borne out of scarcity in post-war Germany as a small-box, no-frills, cans-on-pallets store with no support from the stock markets whatsoever, the Aldi founding brothers were clear enough in their heads to initially think of this as a temporary solution before they earned the cash to set up a proper supermarket.
But, unexpectedly, their simple format turned out to be a winner as the German post-war economic boom was only just beginning and millions of refugees were still settling in. So they continued.
Half a century on, after decades of spreading slowly but continuously – and being declared incapable of growing further time and again by generations of retail analysts – discounters today capture over 43% of German food retail.
“Aldi and Lidl have always moved with the times, albeit in a slow, careful and unspectacular manner…In that sense, they are masters of survival”
Boris Planer, Planet Retail
They are now breaking through into the UK and in France, more than 20 years after entering those markets and suffering two decades of analyst predictions that they couldn’t become a force in those countries. It’s a miracle – or is it?
The truth is that a German discount store today is nothing like its original 1960s version.
Aldi, Lidl and their peers have always moved with the times, albeit in a slow, careful and unspectacular manner, waiting for trends to become firmly established in the wider market before adopting them.
In that sense, they are masters of survival.
Thus, over time, they introduced fruit and vegetables, followed by chilled food, later followed by frozen food.
The 1990s saw the introduction of international specialties in an attack on Italian and Turkish neighbourhood stores, as well as the professionalisation of rotating non-food offers that revolutionised the consumer electronics and clothing segments.
Subsequent highlights included the introduction of convenience food, organic ranges and ’free-from’ foods, as well as the launch of scanner checkouts and innovative in-store bakery solutions.
Since 2012, the gradual listing of branded products at Aldi Süd has stirred up dust and really shaken the German grocery segment.
And in the most recent development, discounters are shedding their traditional no-frills looks to become friendlier places to shop at for a new, experience-driven generation of shoppers.
They are going for the mid-market mind space, but each of those changes has incurred its own risks.
Losing the discount spirit of simplicity has been the most common worry throughout the decades. With the lines now beginning to blur between discounters and supermarkets in terms of store feel, this worry today seems more justified than ever.
Will the difference between a discounter and a supermarket still be clear enough to shoppers? Only time will tell. But if the current strategy does not pay off, the discounters will adapt again. Rest assured, they are not going anywhere.
- Boris Planer is chief economist at Planet Retail