Yesterday we looked at how grocery stores are trying to stay relevan. Adding wine vending and growler taps, however, is tinkering at the margins. Real innovation requires challenging the entire business model.
Similar to what the supermarket chain ALDI (indeed spelled all in caps) has been doing for over 30 years. ALDI offers limited choice in order to provide decent-quality products at great savings. An ALDI store will carry a meager 5% of the items a typical grocery will.
Slowly, slowly, ALDI has infiltrated the U.S. with over 1000 stores. A drop in the bucket, but a successful niche. Lately, it has averaged around a half-dozen openings per month.
Now, everyone wants in on the action. A recent news article highlighted a grocery war in Chicago, where well-loved chains like Jewel-Osco are closing some sites and opening small discount “Save-A-Lot” stores. Most of the action is taking place in urban locations, which would seem to be right in these tough times.
But I think ALDI wouldn’t agree. ALDI’s target customer isn’t poor – she is someone who is OK with limited choice as long as the value is there. (Do we really need medium, large AND extra-large versions of white AND brown eggs?)
Interestingly, the news article mentions that even mass merchadiser Target is planning smaller-size stores in Chicago. Again, it sounds logical, but something is missing (no pun intended).
U.S. consumers are creatures of habit. We have always been promised, and been given, more. “Less is more” is bullshit. More is more, dammit.
Yet Sav-A-Lot and “mini” Target could have success with small-store formats if they focus on Gen Y and teens, who haven’t had enough experience with infinite choice. They couldn’t care less about choice. Give them an iPhone and an Xbox and they could survive for months. (Not great for society, but they couldn’t care less about that either.)
The other night I went to Walgreens for a toiletry item, as I have been trained to do. In front of me at check-out was a YUSSIE – a young urban slacker – holding two 12-packs of soda. My mind reeled: “why wasn’t this kid at the grocery store just two blocks away?” The answer: he hasn’t been trained to buy soda only in one place. He probably buys detergent at the corner bodega for twice the price. He couldn’t care less.
The ALDIs and small-store brands can eventually take over the country. They simply need to focus on the younger segments of the U.S. population. And be very patient. In the meantime, ALDI management should bone up on text messaging and Grand Theft Auto.