Finance Consumer Supermarket shoppers love Aldi’s low prices, and that’s a big worry for Coles and Woolworths

Supermarket shoppers love Aldi’s low prices, and that’s a big worry for Coles and Woolworths

Aldi's low-cost model has been popular with Australian shoppers. Photo: TND
Twitter Facebook Reddit Pinterest Email

Low-cost supermarket chain Aldi is a growing threat to Australia’s supermarket duopoly – and shoppers are the big winners.

In its first Australian Grocery Retail Preference Index, customer data firm dunnhumby examined how well national supermarkets were meeting customers needs.

While Woolworths narrowly “edged out” Coles to take the No.1 position as shoppers’ preferred supermarket, global discounter Aldi “looms not far behind”, the report found.

Aldi is currently growing at a rate that “dwarfs its competitors”, the research revealed.

“While Woolworths and Coles dominate market share, Aldi has grown three times as fast over the last three, five, and 10-year intervals,” the report said.

“If Aldi continues to grow at this pace, they could double their market share in 10 years.”

Aldi’s low prices a hit with shoppers

Aldi’s low prices have put its competitors under pressure, and pleased shoppers.

“Price is Aldi’s main domain today, and they deliver it better than anyone else,” dunnhumby said.

Aldi’s low prices have put pressure on competitors. Source: Australian Grocery RPI

The research showed Aldi’s “growing strength in Australia is impacting competitors”, and that’s forcing other supermarkets to drop their prices – good news for shoppers.

“As Aldi and other discounters increase their presence and impact, we expect the price pillar in Australia to become more important to all retailers,” the report said.

The ‘dark horse’ of Australian supermarkets

Woolworths topped the rankings, followed by Coles and Aldi. Photo: dunnhumby

While Woolworths pipped Coles to come out on top when rated on five primary “customer preference drivers”, third-placed Aldi is poised to knock the duopoly off its perch, dunnhumby found.

According to dunnhumby, Australian shoppers rate supermarkets based on these five key pillars, in order of importance:

  • Convenience and quality
  • Easy shopping experience
  • Price
  • Operations
  • Drive time.

Aldi’s rapid rise makes it the “dark horse” in the race with its “growth in recent years suggests they might be closing the gap,” the report said.

Since opening its first store in 2001, the German powerhouse has expanded to more than 500 stores nationwide.

Aldi’s “intense price competition” has helped it cement itself as a major player in Australia’s $103 billion groceries market, industry analysts IBISWorld said in a 2018 report.

“Aldi’s business model involves offering a limited range of branded products, a wide range of private-label products and little to no marketing,” IBISWorld said.

“This strategy allows the company to pass on savings to consumers in the form of power prices, enabling Aldi to undercut its major competitors, Coles and Woolworths.”

Aldi gets an ‘A’ from customers, but an ‘F’ on health

While Aldi has consistently scored an ‘A’ on customer satisfaction, a recent study found that its private-label products are the least healthy of Australia’s major supermarkets.

The FoodSwitch: State of the Food Supply report released in April ranked the healthiness of the nation’s leading food and drinks manufacturers, with more than 32,000 packaged food items on sale across Australia analysed as part of the annual snapshot.

Aldi’s brand products were the most ultra-processed – foods that usually combine many ingredients, such as sugar, oils, fats, salt, antioxidants, stabilisers and preservatives that have also been significantly processed to promote their taste, convenience and shelf life.

Aldi also had the highest proportion of ‘discretionary’ products – foods that are not a necessary part of a person’s diet – on its shelves at around 50 per cent.

View Comments