The relentless surge in the cost of living has wrought a profound transformation in consumer shopping habits, according to Giles Hurley, the head of Aldi in the UK and Ireland. As the cost-conscious British public grapples with economic challenges, Hurley asserts that the surge in demand for own-label products is an enduring shift that’s here to stay.
A seismic shift towards more affordable supermarket own-label ranges has been witnessed as consumers tighten their belts in an attempt to make their hard-earned pounds stretch further. Aldi, which dethroned Morrisons last year to claim the title of the UK’s fourth-largest supermarket, stands at the forefront of this trend. Alongside its rival Lidl, it has emerged as the fastest-growing supermarket chain this year.
In a striking revelation, it’s been noted that products bearing a supermarket’s own brand now constitute more than half of all consumer purchases, measured by value. Giles Hurley emphasises that when measured by volume, this figure is substantially larger. At present, own-label products are witnessing a growth rate twice that of branded goods. In his words, “Why would [shoppers] go back?”
The overwhelming majority of products on Aldi’s shelves proudly carry the own-label banner, a testament to the enduring appeal of budget-conscious shopping.
Hurley goes on to disclose that Aldi has welcomed nearly one million new customers in the past year, with two-thirds of UK households now opting to shop at the German-owned chain.
Aldi has recently unveiled its financial results for the year ending December 2022. UK sales have surged by nearly £2 billion, reaching £15.5 billion, a remarkable uptick. Operating profit has soared to £178.7 million, nearly tripling the previous year’s earnings.
In stark contrast, many major supermarkets have reported a decline in profits, with Lidl even posting an annual loss. Aldi attributes its remarkable performance to the exceptional prior year, which saw its profit margin plummet to an 11-year low of 0.4%, primarily due to substantial Covid-related costs.
Hurley underscores the precarious nature of profit margins in the retail sector, with Aldi’s margin standing at 1.2% last year. This translates to just over a penny in every pound spent at an Aldi store, highlighting the razor-thin margins that retailers navigate.
Aldi’s ambitious expansion plans remain steadfast, with a long-term target of establishing 1500 stores in the UK, up from the previous goal of 1200. The recent opening of the 1000th Aldi store in Woking signals its continued commitment to growth, with plans to invest an additional £1.4 billion in the UK over the next two years.
Nevertheless, the path to expansion is not without its challenges, particularly in securing prime locations, notably in the southeast of England and London.
One looming question remains: will consumers maintain their loyalty to Aldi once the cost-of-living crisis subsides? Some more affluent shoppers may indeed choose to “trade up” once economic conditions improve, but the imprint of these shifting shopping habits is likely to leave a lasting legacy in the retail landscape.