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Germany

German Discounter Aldi Aims to Profit From Belt-Tightening in US

As the US economy continues sliding south, German discount retailer Aldi is ratcheting up expansion plans there, aiming to make the best of it. It plans to open 75 new US stores this year.

A person carrying an Aldi shopping bag in front of an Aldi store

Aldi aimst to upgrade the look of its stores to attract US customers

Up to now, German deep-discount retail chain Aldi has had limited success in the United States. Its formula of selling a limited selection of no-name products at fire sale prices has made it a roaring success in Europe, but across the ocean it has only managed to attract low-end shoppers.

Now, however, the company is hoping to use the US economic crisis to its advantage, and aims to compete with heavy-hitting US discounter Wal Mart. It has plans to open 75 new stores this year alone, including its first New York branch.

Taking on Wal-Mart at home

Wal-Mart Shop in the USA

Wal-Mart failed to succeed in the German market

Aldi's plans include expansion in Oklahoma and Texas -- up to now, Wal-Mart country. The chain will open a $40-million (30.3-million-euro) distribution center in Dallas.

To date, brand-conscious US shoppers have been a hard sell for Aldi, where the shelves are mostly stocked with no-name wares. But a report in The Wall Street Journal earlier this week explained that the German discounter believes the current economic conditions in the US could make the market ripe for change.

The economic crisis creates "the perfect combination of factors" for success for the discounter, Aldi's US chief Jason Hart told the paper.

Aiming for a higher class of customer

Panorama of New York City

Soon, an Aldi will brighten New York's skyline

Since 1976, Aldi has opened 1,000 branch stores in the USA -- many in poorer neighborhoods. Now, Aldi is aiming to grab a larger share of the middle-class market by building large windows and extra floor space in its stores in order to attract upscale shoppers. The Wall Street Journal described the typical Aldi branch in the US as being short on space, with Spartan product offerings.

Wal-Mart tried to make an incursion into Germany in 1998. But it pulled out in 2006 amid poor press over its employment practices, and also due to the fact that German shoppers -- used to the dirt-cheap wares at Aldi, among other discounters -- found it too expensive.

In the US, though, Aldi is still far from posing a serious threat to Wal-Mart. The Wall Street Journal cited market analyst Planet Retail, which said Aldi's US turnover for 2008 was $7 billion, compared with $374.5 billion for Wal-Mart.

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