Business

The secret to how Aldi's "special buys" are chosen

GIANT jars of peanut butter, children's clothing, televisions and even power generators. Every Wednesday and Saturday morning, shoppers flock to Aldi supermarkets to see what bizarre new bargains are on offer.

But the German supermarket's Special Buys - limited-edition runs of heavily discounted products, which now make up around one-fifth of Aldi's sales - are anything but random, according to Aldi Australia chief executive Tom Daunt.

"We have about 3500 or 4000 items a year that go through our Special Buys, every Wednesday and Saturday, there are 40 or 50 items that come in," he told news.com.au during a recent store tour.

"Some of them are food - we sell Easter products, Christmas products, there might be Italian ranges or Greek themes, American, it's endless - but there's a big section for non-food, too, and the weird and wacky stuff, the general merchandise.

"Because this comes in in limited quantities, the average sellout time is about two weeks, so that gives our customers plenty of time to come in and get what they want, but then that's gone and we're reusing the space for something else, so that turnover of product is very efficient.

"That enables us to take a much lower margin than others and sell it at a much lower price. It [means] even though we only have 1450 items in the range, what people can actually buy from Aldi is actually far broader than it might at first seem."

Mr Daunt described Aldi's range as "focused". "We don't ever call it limited because you can pretty much buy everything you need as a grocery shopper," he said.

"We achieve that focus by having fewer options. So you can buy peanut butter, but if you go into Woolworths you'll find 12 or 15 different types - several different brands, different jar sizes, smooth and crunchy, regular salt and low salt - we don't do that.

"You can find peanut butter in our store but there's smooth and crunchy, that's it. We preselect our range for our customers to a large extent. There is a market, Costco sells it for example, for a 1.1kg jar of peanut butter. We don't have that on our shelves, but we might put it through our Special Buys program."

Similarly, while Aldi sells nappies in its standard range, three or four times a year it will sell Costco-style bulk boxes of nappies through the program.

Aldi, which is rapidly closing in on 10 per cent market share of Australia's $105 billion grocery market, last year recorded total sales of $7.5 billion, a 12 per cent increase on the previous year. Mr Daunt said it was partly the Special Buys that kept customers coming back with "high regularity".

"It brings people into the store. They will come in and buy all of their normal grocery items, and might come out with some unexpected things as well."

So how are the items selected?

"We scout the entire retail market," said Mr Daunt. "We have a really good buying department, we have buying directors whose job it is to range products. We look across all categories, hardware, children's clothing, textiles, fashion, garden centres, nurseries, whatever.

"We don't sell everything, obviously, but if we look into hardware for example, and we notice that particular products and categories are selling well, we'll go out to the market and say, 'Can we buy that, can we get a better quality and potentially get it onto the shop floor for a much lower price?'

"Where we answer that question positively, you'll find it here. There are products we just can't do that, so we leave it alone. We're not in the business of selling everything.

"We've got an inverter generator and an air compressor here, for god's sake. You can go out into the market and buy them any day of the week, but because they're generally slow sellers, you pay a big premium.

"What we're able to do with the special buys is bring a heap of really interesting products people can use in their life, whether it's ski or sporting goods, homewares, furniture, computing, whatever, but because there's such high volumes and turnover, we just bring the price right down."

It comes as Aldi supermarkets around the country brace for chaotic scenes ahead of the retailer's hugely popular annual ski sale this Saturday, with ski jackets and trousers selling for around $30 for kids and $70 for adults, compared with anywhere from $400 to $1200 at a traditional ski store.

"We're now Australia's largest ski retailer," Mr Daunt said. "The quality and specifications of the material, the breathability and waterproofing, is very high. But we buy it in one go, so for a manufacturer, they have one production run, it's out of their factory, and it's paid for.

"Whereas if you drip-feed stock into the local ski store, who's got wages and electricity and rent all year round for only five or six busy weeks out of the year, he needs to price his product very differently than we do.

"I know it seems a little random, but it is properly planned and we really scout everything - there isn't a product category we're not willing to have a go at. It's just one of the aspects that makes us very different."

Earlier this week, Aldi launched its biggest brand overhaul in 16 years, ditching its "Smarter Shopping" tag for "Good Different", vowing to maintain its price advantage over Coles and Woolworths despite rapidly rising electricity costs.

frank.chung@news.com.au

News Corp Australia

Topics:  aldi discounts editors picks shopping tom daunt



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