From their humble beginnings in post-war Germany, ALDI and Lidl have become global supermarket giants.
In this episode, we'll learn how these discount retailers have won over shoppers across the world with their cost-cutting strategies and unique approach to retail.
[00:00:05] Hello, hello hello, and welcome to English Learning for Curious Minds, by Leonardo English.
[00:00:12] The show where you can listen to fascinating stories, and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:20] I'm Alastair Budge, and today we are going to be talking about German supermarkets.
[00:00:26] From Stockholm to Seville, San Francisco to Shanghai, shoppers are flocking to two unlikely places: ALDI and Lidl, German supermarkets which can trace their roots back to post-war Germany.
[00:00:40] So in this episode we are going to look at this phenomenon, ask ourselves where these supermarkets come from, why they are so popular, how they manage to keep their products so cheap, and why they are winning the supermarket wars in Britain.
[00:00:56] Ok then, let’s get right into it and talk about German supermarkets.
[00:01:03] Supermarkets are more than just a place to buy food; you can tell a lot about a country by visiting a supermarket.
[00:01:12] How they are arranged, the kinds of products they stock, where they tend to be in a town or city, these all offer a glimpse into the culture and values that are prevalent in a country.
[00:01:25] In British supermarkets, for example, you find a lot of ready-prepared food, you can find a wide variety of ingredients from different cultures, and a strong emphasis on price.
[00:01:39] What does this tell us?
[00:01:40] Well, perhaps it indicates that British people don’t put such a high value on cooking from scratch, that Britain is a country with a wide variety of cultures and ethnicities, and that British people are price sensitive shoppers, they don’t want to spend more than they absolutely must do.
[00:02:00] In French supermarkets, on the other hand, there’s often a strong focus on freshness and local ingredients, as well as sections full of gourmet meats and cheeses. And of course, often an extensive selection of wine. If you knew nothing about French culture or French people, and you found yourself in a Carrefour or Casino in Paris or Bordeaux, you could probably sense that this is a country where people put a lot of value on the quality of their food, they really enjoy eating and drinking, it is more than a mere source of nutrition.
[00:02:39] I recently moved to Sweden, and in Swedish supermarkets you find very little of the gourmet meats and cheeses you might find in France, but there is a very strong emphasis on environmental sustainability and eco-friendliness, indicating that this is a country that places a strong importance on the environment.
[00:03:00] There is also an absolutely massive selection of yoghurt, which I have no real explanation for other than Swedish people clearly are very picky when it comes to their yoghurt.
[00:03:11] Anyway, the point is that supermarkets reflect the tastes and preferences of the local population, and can be a fun and interesting way into getting an insight into the local culture.
[00:03:26] And supermarkets tend to be national chains, they are unlike a clothing brand like Nike or even a fast food brand like McDonald’s, where the same or very similar products can be sold in Beijing as in Mexico City.
[00:03:44] For supermarkets, breaking into a new country is difficult because the supermarket needs to adjust to local preferences, habits, and values.
[00:03:54] You couldn’t just take a successful British supermarket, let’s say, and recreate it in Paris or Madrid or Rome.
[00:04:02] It wouldn’t work, and British supermarkets have tried.
[00:04:07] The most popular supermarket chain in the UK, Tesco, opened supermarkets in both the United States and China. It even adapted its offering significantly in an attempt to woo American and Chinese shoppers. It didn’t work, and it was forced to retreat after burning through a whopping $3 billion.
[00:04:32] Some supermarkets have had more success in their international expansion, such as the French chain Carrefour, or the Swiss chain Coop, but both have succeeded by offering a similar service to local players. Similar products in a similar style.
[00:04:51] The subject of today’s episode, however, has succeeded in a completely different way, by bringing a uniquely German model to a non-German market, and reaping huge benefits through it.
[00:05:06] Now, especially if you are listening to this in Europe, you will no doubt be aware of the supermarkets we’re talking about: ALDI and Lidl.
[00:05:16] They both have around 12,000 stores each, and their home market of Germany now only makes up a relatively small proportion of the total, around ⅓.
[00:05:27] ALDI and Lidl stores can be found in practically every European country, as well as the United States, Australia and China.
[00:05:36] If you live in one of those countries, you may well live near an ALDI or Lidl. It might even be your supermarket of choice.
[00:05:45] Perhaps you are even listening to this episode while wandering around an ALDI or a Lidl doing your shopping.
[00:05:53] As anyone who shops at these supermarkets will know, there are a few major differences between ALDI and Lidl and most traditional supermarket chains.
[00:06:03] The first is the size.
[00:06:06] ALDI and Lidl tend to be smaller, with ALDIs in particular being much smaller, typically around 1,000 metres squared.
[00:06:16] The selection of products on offer tends to be a lot smaller than traditional supermarkets, with ALDI offering around 1,500 different items compared to around 31,000 in traditional supermarkets.
[00:06:32] So instead of there being 5 or 10 different options for tomato ketchup, let’s say, with different brands and sizes of bottle, there might be just one or two.
[00:06:44] And these products probably have names that sound a bit familiar to you, they sound like brands that you have heard of, and the packaging is probably pretty similar, but you look more closely and the name is slightly different.
[00:07:00] Walking around the supermarket you will probably notice that produce is stored in the box in which it came, so there are no beautiful displays of apples or bananas, they are all still in the cardboard boxes in which they were packed, so you need to fish into the box to take out your fruit or vegetables or whatever it is.
[00:07:22] Another difference is that you would probably struggle to find many employees working in the store, and some stores can be run with as few as five employees.
[00:07:33] And all of these employees seem to be trained to do everything, so if you ask to see the manager, you might find him or her mopping up some spilled milk or stacking the shelves or even scanning products at the checkout till.
[00:07:49] Oh, and on that note, products tend to have much bigger barcodes, so they are easier and quicker to scan.
[00:07:57] If you have never been to an ALDI or Lidl, or you live in a country where these supermarkets don’t have a presence, you might well be thinking “Alastair, they don’t sound very good!”.
[00:08:08] But what would probably be a very pleasant surprise would be after the person at the checkout has scanned all of your shopping basket and told you the price.
[00:08:20] Typically ALDI and Lidl are 15-20% cheaper than traditional supermarkets, so there are considerable savings to be had.
[00:08:30] Now, you probably wouldn’t be surprised only when you see the final bill; as you might expect, ALDI and Lidl make the low prices of their items very visible throughout the supermarket, forever reminding you of the value you are getting.
[00:08:46] In particular, they offer incredibly low prices on so-called “reference goods” or “benchmark items”, in the UK that’s things like a pint of milk or a loaf of bread, products that people would typically know the price of.
[00:09:03] These goods are often sold at cost price, or even at a loss, because their low price can easily be compared to other supermarkets, so you think “oh, a pint of milk at ALDI is 90p, I paid £1.20 the other day at Tesco”.
[00:09:20] And when this happens, it reinforces the idea in a consumer’s mind that everything in the supermarket is similarly cheap, which it normally is..
[00:09:31] In terms of how they manage to make the products so much cheaper, well there are some things that you can see and some things that are less visible.
[00:09:42] Even with knowing little about how to run a supermarket, anyone who goes into one of their stores can see just by walking around how costs are being cut.
[00:09:54] Everything we talked about just a few minutes ago, from the fact that goods are left in boxes for the shopper to unpack themselves to the fact that there are very few staff members working there, this is purposefully designed so that the cost savings are very visible to the customer.
[00:10:12] The point is that everything in an ALDI or Lidl reminds you, the customer, that the price is going to be low. And you don’t mind that there is a more limited choice of products or that it’s hard to find someone to tell you where the eggs are or that you have to remove a box to get to the tomatoes.
[00:10:31] You don’t mind doing it because you understand that you will pay less.
[00:10:37] It’s a very similar sort of idea as why the low-cost airline Ryanair plants stories in the press about how it might even charge people to use the toilet, or its social media teams jump on and embrace complaints about a lack of a good view.
[00:10:54] What they want people to remember is that the company has cut all possible costs, and is passing the savings on to you, as a consumer.
[00:11:05] And there are, of course, many cost saving mechanisms that are less visible. Because the supermarket chains are now so big and can order such large volumes, they can negotiate better prices with suppliers, which they pass on to consumers.
[00:11:22] The limited amount of products that they stock reduces complexity, thereby reducing operational costs. The fact that they have their own brand labels means they can reduce costs, and in some markets they only accepted payment in cash, not card, so they didn’t have to pay payment processing fees.
[00:11:43] And the end result of all of this cost cutting is that they can afford to offer the lowest prices and still make a healthy profit.
[00:11:53] In the case of both ALDI and Lidl, going right back to their humble beginnings, this has always been their strategy: deliver good quality products at a low price.
[00:12:06] ALDI is a little older than Lidl, tracing its roots back to 1946 to Lidl’s 1973.
[00:12:14] The story of ALDI is also more interesting, as it was founded by two brothers who then split the company into two after a row over whether the supermarket would sell cigarettes or not.
[00:12:28] One brother thought it was a good idea, the other was concerned about theft if they started to stock cigarettes.
[00:12:35] And instead of coming to some agreement, the pair decided to take the nuclear option; they split the company into two. And they did so along geographical lines, so there was ALDI Nord in the northern half of Germany and ALDI Süd in the southern half of Germany.
[00:12:56] Same name, slightly different logo, similar but ever so slightly different product range, and two completely separate businesses.
[00:13:06] It is a most unusual arrangement, but it seems to work, and the two rival companies have divided the world into different regions so they are not forced to compete with each other.
[00:13:19] And as to their global aspirations, in the late 1980s and early 1990s both ALDI and Lidl started to expand beyond the German borders.
[00:13:31] The first ALDI store in the UK opened in Birmingham on the 5th of April, 1990, and there are now more than 1,000 stores across the country, making the UK one of the most important markets outside its home market of Germany.
[00:13:48] Lidl arrived in the UK just a few years later, in 1996, and now has a similar amount of stores, 960 at the last count.
[00:14:00] And both of these supermarkets have now taken a sizable bite out of the business of the established British supermarkets, companies like Tesco, Sainsbury’s and ASDA.
[00:14:12] Today, ALDI and Lidl are the fifth and sixth most popular supermarkets in the country, accounting for 10% and 8% of the market respectively.
[00:14:22] It is a similar story in most of the other European markets in which they have a presence, although not to quite as extreme an extent as in the UK.
[00:14:32] It wasn’t all plain sailing though.
[00:14:34] It took a long time for ALDI and Lidl to really break through in the UK market, and they spent a vast amount of money trying to get it right.
[00:14:45] Initially they tried what had worked in Germany: competing on price alone, on a very limited selection of basic goods.
[00:14:55] While this strategy had worked with the notoriously price-sensitive German supermarket shopper, and worked with a particularly budget-conscious type of British consumer, to take a real chunk out of the British market, the German stores needed to attract the middle-class shopper who didn’t necessarily want to be seen in a bargain supermarket.
[00:15:17] And it was here that ALDI and Lidl did something clever to try to attract these more affluent consumers.
[00:15:26] They branched out into more premium items.
[00:15:30] From caviar to champagne to serrano ham, they started to stock a selection of so-called “premium” products at incredibly competitive prices.
[00:15:42] Soon enough, word started to spread.
[00:15:46] Whether it was a journalist or a forty-something business owner driving an Audi, people seemed to be pleasantly surprised by the quality of these premium products. It was something that they weren’t expecting, given the low price tag.
[00:16:02] Wines and champagne from ALDI have won awards, and their premium products tend to be rated as highly or higher than similar items from traditional supermarkets, or even from more premium supermarkets such as Waitrose or Marks & Spencer.
[00:16:21] Getting a bargain on a premium product at ALDI became a source of pride, a talking point for parents at the school gates, and looking at the BMWs and Mercedes parked in the car parks of Lidls and ALDIs, it is clear that they are doing a good job at attracting more affluent shoppers, people in search of premium products at a reasonable price.
[00:16:45] So, the German discount supermarkets had finally managed to achieve the impossible, to get affluent British shoppers to poke their noses inside and see what it was all about.
[00:16:58] And when these shoppers came through the doors, perhaps after reading in a newspaper about an award-winning French wine from ALDI or hearing from a friend that Lidl was selling Canadian lobsters for £4.99 a pop, they would be confronted with the magic of the supermarkets firsthand.
[00:17:17] Good quality products, overall, and very competitive prices.
[00:17:22] And lest I forget, there is another canny strategy that both stores operate to bring bargain hunters to the store, week after week.
[00:17:33] As you may know, they both have an aisle in the middle where they sell non-food items. To quote the Lidl website, “Cruise down our Middle of Lidl aisle for household kit you never knew you needed.”
[00:17:48] In this part of the supermarket, which ALDI calls Special Buys and Lidl calls the Middle of Lidl, the supermarkets sell a time-limited selection of general household stuff at very low prices, with new products being offered every week.
[00:18:05] So the idea is that it brings people back to the store in search of an amazing bargain on everything from frying pans to Christmas trees.
[00:18:16] When I was researching this episode, the main item on sale was a dog shade tent for the bargain price of £14.99, so I would imagine that, even for dog owners, that fits into the category of “household kit you never knew you needed”.
[00:18:36] This has, in the UK at least, become a cultural phenomenon of sorts, with online communities and social media groups dedicated to sharing and discussing the latest finds, and bringing people back into the shop, week after week, in the hope of snagging a bargain.
[00:18:55] All of this has combined to create a fearsome force. The discount retailers in the UK have an almost 20% market share, up from 0% thirty years ago.
[00:19:09] It is a similar story in the other markets in which ALDI and Lidl operate, although few have managed to catch up quite as fast as they have done in the UK.
[00:19:20] So, the story of these two German supermarkets is a fascinating one of national preferences, adapting to local tastes, and savvy business operations.
[00:19:30] And it reminds us about one fundamental human characteristic.
[00:19:35] For all of the differences and regional preferences, for all of the French’s commitment to quality and the Swedes’ dedication to environmental sustainability, from Paris to Pisa, Palmplona to Philadelphia, there is one thing that unites us all: nobody can resist a bargain.
[00:19:55] OK then, that is it for today's episode on German supermarkets.
[00:20:00] I hope it's been an interesting one, and that even if you are a die-hard ALDI or Lidl shopper, it has been fun to learn a little bit more about these supermarkets that are slowly but surely taking a chunk out of the global supermarket industry.
[00:20:15] As always, I would love to know what you thought of this episode.
[00:20:18] Are you an ALDI or Lidl fan? If so, which is your favourite, and why?
[00:20:24] You can head right into our community forum, which is at community.leonardoenglish.com and get chatting away to other curious minds.
[00:20:32] You've been listening to English Learning for Curious Minds, by Leonardo English.
[00:20:36] I'm Alastair Budge, you stay safe, and I'll catch you in the next episode.
[00:00:05] Hello, hello hello, and welcome to English Learning for Curious Minds, by Leonardo English.
[00:00:12] The show where you can listen to fascinating stories, and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:20] I'm Alastair Budge, and today we are going to be talking about German supermarkets.
[00:00:26] From Stockholm to Seville, San Francisco to Shanghai, shoppers are flocking to two unlikely places: ALDI and Lidl, German supermarkets which can trace their roots back to post-war Germany.
[00:00:40] So in this episode we are going to look at this phenomenon, ask ourselves where these supermarkets come from, why they are so popular, how they manage to keep their products so cheap, and why they are winning the supermarket wars in Britain.
[00:00:56] Ok then, let’s get right into it and talk about German supermarkets.
[00:01:03] Supermarkets are more than just a place to buy food; you can tell a lot about a country by visiting a supermarket.
[00:01:12] How they are arranged, the kinds of products they stock, where they tend to be in a town or city, these all offer a glimpse into the culture and values that are prevalent in a country.
[00:01:25] In British supermarkets, for example, you find a lot of ready-prepared food, you can find a wide variety of ingredients from different cultures, and a strong emphasis on price.
[00:01:39] What does this tell us?
[00:01:40] Well, perhaps it indicates that British people don’t put such a high value on cooking from scratch, that Britain is a country with a wide variety of cultures and ethnicities, and that British people are price sensitive shoppers, they don’t want to spend more than they absolutely must do.
[00:02:00] In French supermarkets, on the other hand, there’s often a strong focus on freshness and local ingredients, as well as sections full of gourmet meats and cheeses. And of course, often an extensive selection of wine. If you knew nothing about French culture or French people, and you found yourself in a Carrefour or Casino in Paris or Bordeaux, you could probably sense that this is a country where people put a lot of value on the quality of their food, they really enjoy eating and drinking, it is more than a mere source of nutrition.
[00:02:39] I recently moved to Sweden, and in Swedish supermarkets you find very little of the gourmet meats and cheeses you might find in France, but there is a very strong emphasis on environmental sustainability and eco-friendliness, indicating that this is a country that places a strong importance on the environment.
[00:03:00] There is also an absolutely massive selection of yoghurt, which I have no real explanation for other than Swedish people clearly are very picky when it comes to their yoghurt.
[00:03:11] Anyway, the point is that supermarkets reflect the tastes and preferences of the local population, and can be a fun and interesting way into getting an insight into the local culture.
[00:03:26] And supermarkets tend to be national chains, they are unlike a clothing brand like Nike or even a fast food brand like McDonald’s, where the same or very similar products can be sold in Beijing as in Mexico City.
[00:03:44] For supermarkets, breaking into a new country is difficult because the supermarket needs to adjust to local preferences, habits, and values.
[00:03:54] You couldn’t just take a successful British supermarket, let’s say, and recreate it in Paris or Madrid or Rome.
[00:04:02] It wouldn’t work, and British supermarkets have tried.
[00:04:07] The most popular supermarket chain in the UK, Tesco, opened supermarkets in both the United States and China. It even adapted its offering significantly in an attempt to woo American and Chinese shoppers. It didn’t work, and it was forced to retreat after burning through a whopping $3 billion.
[00:04:32] Some supermarkets have had more success in their international expansion, such as the French chain Carrefour, or the Swiss chain Coop, but both have succeeded by offering a similar service to local players. Similar products in a similar style.
[00:04:51] The subject of today’s episode, however, has succeeded in a completely different way, by bringing a uniquely German model to a non-German market, and reaping huge benefits through it.
[00:05:06] Now, especially if you are listening to this in Europe, you will no doubt be aware of the supermarkets we’re talking about: ALDI and Lidl.
[00:05:16] They both have around 12,000 stores each, and their home market of Germany now only makes up a relatively small proportion of the total, around ⅓.
[00:05:27] ALDI and Lidl stores can be found in practically every European country, as well as the United States, Australia and China.
[00:05:36] If you live in one of those countries, you may well live near an ALDI or Lidl. It might even be your supermarket of choice.
[00:05:45] Perhaps you are even listening to this episode while wandering around an ALDI or a Lidl doing your shopping.
[00:05:53] As anyone who shops at these supermarkets will know, there are a few major differences between ALDI and Lidl and most traditional supermarket chains.
[00:06:03] The first is the size.
[00:06:06] ALDI and Lidl tend to be smaller, with ALDIs in particular being much smaller, typically around 1,000 metres squared.
[00:06:16] The selection of products on offer tends to be a lot smaller than traditional supermarkets, with ALDI offering around 1,500 different items compared to around 31,000 in traditional supermarkets.
[00:06:32] So instead of there being 5 or 10 different options for tomato ketchup, let’s say, with different brands and sizes of bottle, there might be just one or two.
[00:06:44] And these products probably have names that sound a bit familiar to you, they sound like brands that you have heard of, and the packaging is probably pretty similar, but you look more closely and the name is slightly different.
[00:07:00] Walking around the supermarket you will probably notice that produce is stored in the box in which it came, so there are no beautiful displays of apples or bananas, they are all still in the cardboard boxes in which they were packed, so you need to fish into the box to take out your fruit or vegetables or whatever it is.
[00:07:22] Another difference is that you would probably struggle to find many employees working in the store, and some stores can be run with as few as five employees.
[00:07:33] And all of these employees seem to be trained to do everything, so if you ask to see the manager, you might find him or her mopping up some spilled milk or stacking the shelves or even scanning products at the checkout till.
[00:07:49] Oh, and on that note, products tend to have much bigger barcodes, so they are easier and quicker to scan.
[00:07:57] If you have never been to an ALDI or Lidl, or you live in a country where these supermarkets don’t have a presence, you might well be thinking “Alastair, they don’t sound very good!”.
[00:08:08] But what would probably be a very pleasant surprise would be after the person at the checkout has scanned all of your shopping basket and told you the price.
[00:08:20] Typically ALDI and Lidl are 15-20% cheaper than traditional supermarkets, so there are considerable savings to be had.
[00:08:30] Now, you probably wouldn’t be surprised only when you see the final bill; as you might expect, ALDI and Lidl make the low prices of their items very visible throughout the supermarket, forever reminding you of the value you are getting.
[00:08:46] In particular, they offer incredibly low prices on so-called “reference goods” or “benchmark items”, in the UK that’s things like a pint of milk or a loaf of bread, products that people would typically know the price of.
[00:09:03] These goods are often sold at cost price, or even at a loss, because their low price can easily be compared to other supermarkets, so you think “oh, a pint of milk at ALDI is 90p, I paid £1.20 the other day at Tesco”.
[00:09:20] And when this happens, it reinforces the idea in a consumer’s mind that everything in the supermarket is similarly cheap, which it normally is..
[00:09:31] In terms of how they manage to make the products so much cheaper, well there are some things that you can see and some things that are less visible.
[00:09:42] Even with knowing little about how to run a supermarket, anyone who goes into one of their stores can see just by walking around how costs are being cut.
[00:09:54] Everything we talked about just a few minutes ago, from the fact that goods are left in boxes for the shopper to unpack themselves to the fact that there are very few staff members working there, this is purposefully designed so that the cost savings are very visible to the customer.
[00:10:12] The point is that everything in an ALDI or Lidl reminds you, the customer, that the price is going to be low. And you don’t mind that there is a more limited choice of products or that it’s hard to find someone to tell you where the eggs are or that you have to remove a box to get to the tomatoes.
[00:10:31] You don’t mind doing it because you understand that you will pay less.
[00:10:37] It’s a very similar sort of idea as why the low-cost airline Ryanair plants stories in the press about how it might even charge people to use the toilet, or its social media teams jump on and embrace complaints about a lack of a good view.
[00:10:54] What they want people to remember is that the company has cut all possible costs, and is passing the savings on to you, as a consumer.
[00:11:05] And there are, of course, many cost saving mechanisms that are less visible. Because the supermarket chains are now so big and can order such large volumes, they can negotiate better prices with suppliers, which they pass on to consumers.
[00:11:22] The limited amount of products that they stock reduces complexity, thereby reducing operational costs. The fact that they have their own brand labels means they can reduce costs, and in some markets they only accepted payment in cash, not card, so they didn’t have to pay payment processing fees.
[00:11:43] And the end result of all of this cost cutting is that they can afford to offer the lowest prices and still make a healthy profit.
[00:11:53] In the case of both ALDI and Lidl, going right back to their humble beginnings, this has always been their strategy: deliver good quality products at a low price.
[00:12:06] ALDI is a little older than Lidl, tracing its roots back to 1946 to Lidl’s 1973.
[00:12:14] The story of ALDI is also more interesting, as it was founded by two brothers who then split the company into two after a row over whether the supermarket would sell cigarettes or not.
[00:12:28] One brother thought it was a good idea, the other was concerned about theft if they started to stock cigarettes.
[00:12:35] And instead of coming to some agreement, the pair decided to take the nuclear option; they split the company into two. And they did so along geographical lines, so there was ALDI Nord in the northern half of Germany and ALDI Süd in the southern half of Germany.
[00:12:56] Same name, slightly different logo, similar but ever so slightly different product range, and two completely separate businesses.
[00:13:06] It is a most unusual arrangement, but it seems to work, and the two rival companies have divided the world into different regions so they are not forced to compete with each other.
[00:13:19] And as to their global aspirations, in the late 1980s and early 1990s both ALDI and Lidl started to expand beyond the German borders.
[00:13:31] The first ALDI store in the UK opened in Birmingham on the 5th of April, 1990, and there are now more than 1,000 stores across the country, making the UK one of the most important markets outside its home market of Germany.
[00:13:48] Lidl arrived in the UK just a few years later, in 1996, and now has a similar amount of stores, 960 at the last count.
[00:14:00] And both of these supermarkets have now taken a sizable bite out of the business of the established British supermarkets, companies like Tesco, Sainsbury’s and ASDA.
[00:14:12] Today, ALDI and Lidl are the fifth and sixth most popular supermarkets in the country, accounting for 10% and 8% of the market respectively.
[00:14:22] It is a similar story in most of the other European markets in which they have a presence, although not to quite as extreme an extent as in the UK.
[00:14:32] It wasn’t all plain sailing though.
[00:14:34] It took a long time for ALDI and Lidl to really break through in the UK market, and they spent a vast amount of money trying to get it right.
[00:14:45] Initially they tried what had worked in Germany: competing on price alone, on a very limited selection of basic goods.
[00:14:55] While this strategy had worked with the notoriously price-sensitive German supermarket shopper, and worked with a particularly budget-conscious type of British consumer, to take a real chunk out of the British market, the German stores needed to attract the middle-class shopper who didn’t necessarily want to be seen in a bargain supermarket.
[00:15:17] And it was here that ALDI and Lidl did something clever to try to attract these more affluent consumers.
[00:15:26] They branched out into more premium items.
[00:15:30] From caviar to champagne to serrano ham, they started to stock a selection of so-called “premium” products at incredibly competitive prices.
[00:15:42] Soon enough, word started to spread.
[00:15:46] Whether it was a journalist or a forty-something business owner driving an Audi, people seemed to be pleasantly surprised by the quality of these premium products. It was something that they weren’t expecting, given the low price tag.
[00:16:02] Wines and champagne from ALDI have won awards, and their premium products tend to be rated as highly or higher than similar items from traditional supermarkets, or even from more premium supermarkets such as Waitrose or Marks & Spencer.
[00:16:21] Getting a bargain on a premium product at ALDI became a source of pride, a talking point for parents at the school gates, and looking at the BMWs and Mercedes parked in the car parks of Lidls and ALDIs, it is clear that they are doing a good job at attracting more affluent shoppers, people in search of premium products at a reasonable price.
[00:16:45] So, the German discount supermarkets had finally managed to achieve the impossible, to get affluent British shoppers to poke their noses inside and see what it was all about.
[00:16:58] And when these shoppers came through the doors, perhaps after reading in a newspaper about an award-winning French wine from ALDI or hearing from a friend that Lidl was selling Canadian lobsters for £4.99 a pop, they would be confronted with the magic of the supermarkets firsthand.
[00:17:17] Good quality products, overall, and very competitive prices.
[00:17:22] And lest I forget, there is another canny strategy that both stores operate to bring bargain hunters to the store, week after week.
[00:17:33] As you may know, they both have an aisle in the middle where they sell non-food items. To quote the Lidl website, “Cruise down our Middle of Lidl aisle for household kit you never knew you needed.”
[00:17:48] In this part of the supermarket, which ALDI calls Special Buys and Lidl calls the Middle of Lidl, the supermarkets sell a time-limited selection of general household stuff at very low prices, with new products being offered every week.
[00:18:05] So the idea is that it brings people back to the store in search of an amazing bargain on everything from frying pans to Christmas trees.
[00:18:16] When I was researching this episode, the main item on sale was a dog shade tent for the bargain price of £14.99, so I would imagine that, even for dog owners, that fits into the category of “household kit you never knew you needed”.
[00:18:36] This has, in the UK at least, become a cultural phenomenon of sorts, with online communities and social media groups dedicated to sharing and discussing the latest finds, and bringing people back into the shop, week after week, in the hope of snagging a bargain.
[00:18:55] All of this has combined to create a fearsome force. The discount retailers in the UK have an almost 20% market share, up from 0% thirty years ago.
[00:19:09] It is a similar story in the other markets in which ALDI and Lidl operate, although few have managed to catch up quite as fast as they have done in the UK.
[00:19:20] So, the story of these two German supermarkets is a fascinating one of national preferences, adapting to local tastes, and savvy business operations.
[00:19:30] And it reminds us about one fundamental human characteristic.
[00:19:35] For all of the differences and regional preferences, for all of the French’s commitment to quality and the Swedes’ dedication to environmental sustainability, from Paris to Pisa, Palmplona to Philadelphia, there is one thing that unites us all: nobody can resist a bargain.
[00:19:55] OK then, that is it for today's episode on German supermarkets.
[00:20:00] I hope it's been an interesting one, and that even if you are a die-hard ALDI or Lidl shopper, it has been fun to learn a little bit more about these supermarkets that are slowly but surely taking a chunk out of the global supermarket industry.
[00:20:15] As always, I would love to know what you thought of this episode.
[00:20:18] Are you an ALDI or Lidl fan? If so, which is your favourite, and why?
[00:20:24] You can head right into our community forum, which is at community.leonardoenglish.com and get chatting away to other curious minds.
[00:20:32] You've been listening to English Learning for Curious Minds, by Leonardo English.
[00:20:36] I'm Alastair Budge, you stay safe, and I'll catch you in the next episode.
[00:00:05] Hello, hello hello, and welcome to English Learning for Curious Minds, by Leonardo English.
[00:00:12] The show where you can listen to fascinating stories, and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:20] I'm Alastair Budge, and today we are going to be talking about German supermarkets.
[00:00:26] From Stockholm to Seville, San Francisco to Shanghai, shoppers are flocking to two unlikely places: ALDI and Lidl, German supermarkets which can trace their roots back to post-war Germany.
[00:00:40] So in this episode we are going to look at this phenomenon, ask ourselves where these supermarkets come from, why they are so popular, how they manage to keep their products so cheap, and why they are winning the supermarket wars in Britain.
[00:00:56] Ok then, let’s get right into it and talk about German supermarkets.
[00:01:03] Supermarkets are more than just a place to buy food; you can tell a lot about a country by visiting a supermarket.
[00:01:12] How they are arranged, the kinds of products they stock, where they tend to be in a town or city, these all offer a glimpse into the culture and values that are prevalent in a country.
[00:01:25] In British supermarkets, for example, you find a lot of ready-prepared food, you can find a wide variety of ingredients from different cultures, and a strong emphasis on price.
[00:01:39] What does this tell us?
[00:01:40] Well, perhaps it indicates that British people don’t put such a high value on cooking from scratch, that Britain is a country with a wide variety of cultures and ethnicities, and that British people are price sensitive shoppers, they don’t want to spend more than they absolutely must do.
[00:02:00] In French supermarkets, on the other hand, there’s often a strong focus on freshness and local ingredients, as well as sections full of gourmet meats and cheeses. And of course, often an extensive selection of wine. If you knew nothing about French culture or French people, and you found yourself in a Carrefour or Casino in Paris or Bordeaux, you could probably sense that this is a country where people put a lot of value on the quality of their food, they really enjoy eating and drinking, it is more than a mere source of nutrition.
[00:02:39] I recently moved to Sweden, and in Swedish supermarkets you find very little of the gourmet meats and cheeses you might find in France, but there is a very strong emphasis on environmental sustainability and eco-friendliness, indicating that this is a country that places a strong importance on the environment.
[00:03:00] There is also an absolutely massive selection of yoghurt, which I have no real explanation for other than Swedish people clearly are very picky when it comes to their yoghurt.
[00:03:11] Anyway, the point is that supermarkets reflect the tastes and preferences of the local population, and can be a fun and interesting way into getting an insight into the local culture.
[00:03:26] And supermarkets tend to be national chains, they are unlike a clothing brand like Nike or even a fast food brand like McDonald’s, where the same or very similar products can be sold in Beijing as in Mexico City.
[00:03:44] For supermarkets, breaking into a new country is difficult because the supermarket needs to adjust to local preferences, habits, and values.
[00:03:54] You couldn’t just take a successful British supermarket, let’s say, and recreate it in Paris or Madrid or Rome.
[00:04:02] It wouldn’t work, and British supermarkets have tried.
[00:04:07] The most popular supermarket chain in the UK, Tesco, opened supermarkets in both the United States and China. It even adapted its offering significantly in an attempt to woo American and Chinese shoppers. It didn’t work, and it was forced to retreat after burning through a whopping $3 billion.
[00:04:32] Some supermarkets have had more success in their international expansion, such as the French chain Carrefour, or the Swiss chain Coop, but both have succeeded by offering a similar service to local players. Similar products in a similar style.
[00:04:51] The subject of today’s episode, however, has succeeded in a completely different way, by bringing a uniquely German model to a non-German market, and reaping huge benefits through it.
[00:05:06] Now, especially if you are listening to this in Europe, you will no doubt be aware of the supermarkets we’re talking about: ALDI and Lidl.
[00:05:16] They both have around 12,000 stores each, and their home market of Germany now only makes up a relatively small proportion of the total, around ⅓.
[00:05:27] ALDI and Lidl stores can be found in practically every European country, as well as the United States, Australia and China.
[00:05:36] If you live in one of those countries, you may well live near an ALDI or Lidl. It might even be your supermarket of choice.
[00:05:45] Perhaps you are even listening to this episode while wandering around an ALDI or a Lidl doing your shopping.
[00:05:53] As anyone who shops at these supermarkets will know, there are a few major differences between ALDI and Lidl and most traditional supermarket chains.
[00:06:03] The first is the size.
[00:06:06] ALDI and Lidl tend to be smaller, with ALDIs in particular being much smaller, typically around 1,000 metres squared.
[00:06:16] The selection of products on offer tends to be a lot smaller than traditional supermarkets, with ALDI offering around 1,500 different items compared to around 31,000 in traditional supermarkets.
[00:06:32] So instead of there being 5 or 10 different options for tomato ketchup, let’s say, with different brands and sizes of bottle, there might be just one or two.
[00:06:44] And these products probably have names that sound a bit familiar to you, they sound like brands that you have heard of, and the packaging is probably pretty similar, but you look more closely and the name is slightly different.
[00:07:00] Walking around the supermarket you will probably notice that produce is stored in the box in which it came, so there are no beautiful displays of apples or bananas, they are all still in the cardboard boxes in which they were packed, so you need to fish into the box to take out your fruit or vegetables or whatever it is.
[00:07:22] Another difference is that you would probably struggle to find many employees working in the store, and some stores can be run with as few as five employees.
[00:07:33] And all of these employees seem to be trained to do everything, so if you ask to see the manager, you might find him or her mopping up some spilled milk or stacking the shelves or even scanning products at the checkout till.
[00:07:49] Oh, and on that note, products tend to have much bigger barcodes, so they are easier and quicker to scan.
[00:07:57] If you have never been to an ALDI or Lidl, or you live in a country where these supermarkets don’t have a presence, you might well be thinking “Alastair, they don’t sound very good!”.
[00:08:08] But what would probably be a very pleasant surprise would be after the person at the checkout has scanned all of your shopping basket and told you the price.
[00:08:20] Typically ALDI and Lidl are 15-20% cheaper than traditional supermarkets, so there are considerable savings to be had.
[00:08:30] Now, you probably wouldn’t be surprised only when you see the final bill; as you might expect, ALDI and Lidl make the low prices of their items very visible throughout the supermarket, forever reminding you of the value you are getting.
[00:08:46] In particular, they offer incredibly low prices on so-called “reference goods” or “benchmark items”, in the UK that’s things like a pint of milk or a loaf of bread, products that people would typically know the price of.
[00:09:03] These goods are often sold at cost price, or even at a loss, because their low price can easily be compared to other supermarkets, so you think “oh, a pint of milk at ALDI is 90p, I paid £1.20 the other day at Tesco”.
[00:09:20] And when this happens, it reinforces the idea in a consumer’s mind that everything in the supermarket is similarly cheap, which it normally is..
[00:09:31] In terms of how they manage to make the products so much cheaper, well there are some things that you can see and some things that are less visible.
[00:09:42] Even with knowing little about how to run a supermarket, anyone who goes into one of their stores can see just by walking around how costs are being cut.
[00:09:54] Everything we talked about just a few minutes ago, from the fact that goods are left in boxes for the shopper to unpack themselves to the fact that there are very few staff members working there, this is purposefully designed so that the cost savings are very visible to the customer.
[00:10:12] The point is that everything in an ALDI or Lidl reminds you, the customer, that the price is going to be low. And you don’t mind that there is a more limited choice of products or that it’s hard to find someone to tell you where the eggs are or that you have to remove a box to get to the tomatoes.
[00:10:31] You don’t mind doing it because you understand that you will pay less.
[00:10:37] It’s a very similar sort of idea as why the low-cost airline Ryanair plants stories in the press about how it might even charge people to use the toilet, or its social media teams jump on and embrace complaints about a lack of a good view.
[00:10:54] What they want people to remember is that the company has cut all possible costs, and is passing the savings on to you, as a consumer.
[00:11:05] And there are, of course, many cost saving mechanisms that are less visible. Because the supermarket chains are now so big and can order such large volumes, they can negotiate better prices with suppliers, which they pass on to consumers.
[00:11:22] The limited amount of products that they stock reduces complexity, thereby reducing operational costs. The fact that they have their own brand labels means they can reduce costs, and in some markets they only accepted payment in cash, not card, so they didn’t have to pay payment processing fees.
[00:11:43] And the end result of all of this cost cutting is that they can afford to offer the lowest prices and still make a healthy profit.
[00:11:53] In the case of both ALDI and Lidl, going right back to their humble beginnings, this has always been their strategy: deliver good quality products at a low price.
[00:12:06] ALDI is a little older than Lidl, tracing its roots back to 1946 to Lidl’s 1973.
[00:12:14] The story of ALDI is also more interesting, as it was founded by two brothers who then split the company into two after a row over whether the supermarket would sell cigarettes or not.
[00:12:28] One brother thought it was a good idea, the other was concerned about theft if they started to stock cigarettes.
[00:12:35] And instead of coming to some agreement, the pair decided to take the nuclear option; they split the company into two. And they did so along geographical lines, so there was ALDI Nord in the northern half of Germany and ALDI Süd in the southern half of Germany.
[00:12:56] Same name, slightly different logo, similar but ever so slightly different product range, and two completely separate businesses.
[00:13:06] It is a most unusual arrangement, but it seems to work, and the two rival companies have divided the world into different regions so they are not forced to compete with each other.
[00:13:19] And as to their global aspirations, in the late 1980s and early 1990s both ALDI and Lidl started to expand beyond the German borders.
[00:13:31] The first ALDI store in the UK opened in Birmingham on the 5th of April, 1990, and there are now more than 1,000 stores across the country, making the UK one of the most important markets outside its home market of Germany.
[00:13:48] Lidl arrived in the UK just a few years later, in 1996, and now has a similar amount of stores, 960 at the last count.
[00:14:00] And both of these supermarkets have now taken a sizable bite out of the business of the established British supermarkets, companies like Tesco, Sainsbury’s and ASDA.
[00:14:12] Today, ALDI and Lidl are the fifth and sixth most popular supermarkets in the country, accounting for 10% and 8% of the market respectively.
[00:14:22] It is a similar story in most of the other European markets in which they have a presence, although not to quite as extreme an extent as in the UK.
[00:14:32] It wasn’t all plain sailing though.
[00:14:34] It took a long time for ALDI and Lidl to really break through in the UK market, and they spent a vast amount of money trying to get it right.
[00:14:45] Initially they tried what had worked in Germany: competing on price alone, on a very limited selection of basic goods.
[00:14:55] While this strategy had worked with the notoriously price-sensitive German supermarket shopper, and worked with a particularly budget-conscious type of British consumer, to take a real chunk out of the British market, the German stores needed to attract the middle-class shopper who didn’t necessarily want to be seen in a bargain supermarket.
[00:15:17] And it was here that ALDI and Lidl did something clever to try to attract these more affluent consumers.
[00:15:26] They branched out into more premium items.
[00:15:30] From caviar to champagne to serrano ham, they started to stock a selection of so-called “premium” products at incredibly competitive prices.
[00:15:42] Soon enough, word started to spread.
[00:15:46] Whether it was a journalist or a forty-something business owner driving an Audi, people seemed to be pleasantly surprised by the quality of these premium products. It was something that they weren’t expecting, given the low price tag.
[00:16:02] Wines and champagne from ALDI have won awards, and their premium products tend to be rated as highly or higher than similar items from traditional supermarkets, or even from more premium supermarkets such as Waitrose or Marks & Spencer.
[00:16:21] Getting a bargain on a premium product at ALDI became a source of pride, a talking point for parents at the school gates, and looking at the BMWs and Mercedes parked in the car parks of Lidls and ALDIs, it is clear that they are doing a good job at attracting more affluent shoppers, people in search of premium products at a reasonable price.
[00:16:45] So, the German discount supermarkets had finally managed to achieve the impossible, to get affluent British shoppers to poke their noses inside and see what it was all about.
[00:16:58] And when these shoppers came through the doors, perhaps after reading in a newspaper about an award-winning French wine from ALDI or hearing from a friend that Lidl was selling Canadian lobsters for £4.99 a pop, they would be confronted with the magic of the supermarkets firsthand.
[00:17:17] Good quality products, overall, and very competitive prices.
[00:17:22] And lest I forget, there is another canny strategy that both stores operate to bring bargain hunters to the store, week after week.
[00:17:33] As you may know, they both have an aisle in the middle where they sell non-food items. To quote the Lidl website, “Cruise down our Middle of Lidl aisle for household kit you never knew you needed.”
[00:17:48] In this part of the supermarket, which ALDI calls Special Buys and Lidl calls the Middle of Lidl, the supermarkets sell a time-limited selection of general household stuff at very low prices, with new products being offered every week.
[00:18:05] So the idea is that it brings people back to the store in search of an amazing bargain on everything from frying pans to Christmas trees.
[00:18:16] When I was researching this episode, the main item on sale was a dog shade tent for the bargain price of £14.99, so I would imagine that, even for dog owners, that fits into the category of “household kit you never knew you needed”.
[00:18:36] This has, in the UK at least, become a cultural phenomenon of sorts, with online communities and social media groups dedicated to sharing and discussing the latest finds, and bringing people back into the shop, week after week, in the hope of snagging a bargain.
[00:18:55] All of this has combined to create a fearsome force. The discount retailers in the UK have an almost 20% market share, up from 0% thirty years ago.
[00:19:09] It is a similar story in the other markets in which ALDI and Lidl operate, although few have managed to catch up quite as fast as they have done in the UK.
[00:19:20] So, the story of these two German supermarkets is a fascinating one of national preferences, adapting to local tastes, and savvy business operations.
[00:19:30] And it reminds us about one fundamental human characteristic.
[00:19:35] For all of the differences and regional preferences, for all of the French’s commitment to quality and the Swedes’ dedication to environmental sustainability, from Paris to Pisa, Palmplona to Philadelphia, there is one thing that unites us all: nobody can resist a bargain.
[00:19:55] OK then, that is it for today's episode on German supermarkets.
[00:20:00] I hope it's been an interesting one, and that even if you are a die-hard ALDI or Lidl shopper, it has been fun to learn a little bit more about these supermarkets that are slowly but surely taking a chunk out of the global supermarket industry.
[00:20:15] As always, I would love to know what you thought of this episode.
[00:20:18] Are you an ALDI or Lidl fan? If so, which is your favourite, and why?
[00:20:24] You can head right into our community forum, which is at community.leonardoenglish.com and get chatting away to other curious minds.
[00:20:32] You've been listening to English Learning for Curious Minds, by Leonardo English.
[00:20:36] I'm Alastair Budge, you stay safe, and I'll catch you in the next episode.
