Aldi holding 10% market share as it continues to challenge supermarket duopoly

German supermarket Aldi is estimated to now hold a double-digit percentage share of the Australian grocery sector, at the expense of the nation’s supermarket duopoly.

Australian Competition and Consumer Commission chairman Rod Sims believes Aldi to now have “close to north of 10 percent of the market now”, according to Fairfax.

Sims believes this has knocked the dynamic duo of Coles and Woolworths down to a combined 70% share, whereas the two held closer to a 75% share a few years ago.

Aldi’s growth has been exponential over the past years, and now the retailer has over 400 stores across the country, employing over 9000 staff. Its sales in 2013 came in just under $5 billion, up $2.86 billion from 2010.

During this period, the retailer has continued to shake up the market, prompting price wars between Coles and Woolworths.

Aldi offers a similar, if not slightly reduced, range to other supermarkets, including fresh produce and meat. The store prides itself on its bi-weekly product specials, which can be anything from a microwave to a traffic cone, all heavily discounted.

This specials method has been so successful that other Australian non-grocery retailers are also taking notice, with Bunnings chief executive John Gilliam recently indicating that the hardware chain pays close attention to the special offers.

Brian Walker, chief executive of the Retail Doctor Group, told SmartCompany that Sims’ 10% estimation is “absolutely accurate” and that Aldi is comfortably in the top three grocery retailers in Australia, and it is continuing to grow.

“We’ve had this duopoly for a long time, and now Aldi has established itself for the middle class of Australia,” Walker says.

“Aldi prides itself on its price driven focus, high quality standards, and a strong go-to-market process, its stores are always well stocked and quite tidy.”

Walker believes there are a number of reasons for Aldi’s success, with its recent expansion into perimeter departments (meat, deli, produce, bakery, and seafood) one of the primary reasons.

“It draws a lot of fresh food customers, and makes Aldi a true ‘one stop shop’,” Walker says.

“Its weekly merchandise specials also draw in customers, more for the bargains and element of surprise, which really appeals strongly to them.”

One of the concerns with Aldi’s expansion was the affect on other prevalent small grocery retailers such as Metcash’s IGA. While Walker says there is no immediate pressure on IGA, but there will be an effect eventually.

“IGA does good work for community businesses and its been showing some growth recently. But in the mid to longer term, they’re under pressure,” Walker says.

“Its market share will be fundamentally affected by Aldi.”

Walker says that he has “no doubt” Aldi will continue growing, but at a slower rate than some may expect. He warns of the potential affect other international retailers, such as Lidl, could have on Australia’s grocery sector.

Lidl is another German discount supermarket chain, established in 1930 and found in over 20 countries across Europe. The retailer is a giant in every sense of the word, with over 10,000 stores across the continent, and is the primary competitor of Aldi in Europe.

Walker describes Lidl as a similar to Aldi but with “very deep discounts”, and warns that if it came to Australia, it wouldn’t go away easily.

“Lidl is tipped to come to Australia as well, and their expansion would be quick. They’re very strong, and very aggressive,” he says.

Despite indicating they would not plan to enter the Australian market, Fairfax reports Lidl has been reaching out to Australian suppliers, and has talked to the Victorian government.