A success in Shanghai, Aldi is now expanding its retail acumen further afield in China

Every Tuesday and Sunday, I take a brief 5-minute walk to the Aldi store near my home to pick up fresh bread and a roasted chicken – my go-to staples for the week. It's a quick, efficient trip that I have come to appreciate.

Meanwhile, my son is just as hooked on Aldi's convenience. He uses the store's online app nearly every other day to order juices and snacks. Within half an hour, they're delivered straight to our door – no hassle, no wait.

In a city like Shanghai, where time is precious, Aldi has carved out a unique space in the retail landscape. It offers the convenience and accessibility of smaller stores like 7-11 and FamilyMart, but with the bonus of better value and a broader range of quality essentials typically found only at larger warehouse retailers like Sam's or Costco.

Aldi's rise in Shanghai is no accident. The German-based discount retailer, which has opened 62 stores in the city over the past six years, has defied the odds in a fiercely competitive market by embracing localization with precision.

Many foreign brands have struggled in China, but Aldi has transformed its stores into community hubs, winning over urban consumers with a strategy that blends efficiency, affordability and cultural adaptation.

Rethinking retail: Aldi's playbook

So, what's behind Aldi's success? A good understanding of local tastes and shopping habits. The retailer has redefined the supermarket experience by offering not just products, but shopping experiences tailored to Chinese consumers.

Aldi's innovation shines in its fusion of Western and Chinese flavors. Take its Sichuan-style spicy crayfish salad – a ready-to-eat dish that blends the bold, fiery essence of Sichuan cuisine with the widely loved Chinese crayfish. This fusion exemplifies Aldi's ability to combine local culinary traditions with its signature, streamlined offerings. It's just one of many ways Aldi has adapted its products to local tastes.

Moreover, Aldi's store design feels unmistakably Shanghai. The minimalist interiors, featuring natural wood finishes and contemporary touches, create an atmosphere that blends urban sophistication with a warm, welcoming vibe.

Unlike the sterile, warehouse-style discount stores typically seen in the West, Aldi's Shanghai locations have become local gathering spots. Their modern yet cozy aesthetic – reminiscent of chic local cafés and boutique-style stores – appeals to urban professionals who value both practicality and visual appeal.

Long retail experience

Aldi is certainly no stranger to retailing. The family-owned chain was founded by brothers Karl and Theo Abrecht in 1946 after they took over the Essen grocery store opened by their mother in 1913.

The business was split into two separate groups in 1960 – Aldi North and Aldi South. Combined, they operate more than 12,000 stores in 18 countries. The entity operating in China is Aldi South.

Aldi's philosophy of fusing local culture with low prices has succeeded globally because of the retailer's clear understanding of its target markets. In China, that means busy young professionals, office workers and pressed-for-time parents. These consumers appreciate Aldi's curated selection of ready-to-eat meals and its fresh, easy-to-cook options.

Of the 2,000 stock-keeping units at an Aldi store, about 1,500 are daily necessities, perfect for quick trips during lunch breaks or after work.

Aldi has strategically positioned its stores in bustling residential and business districts, maximizing convenience. The inclusion of café counters – offering quick, healthy snacks like freshly made rice bowls – has become a hit with locals seeking nutritious, fast-meal options. In fact, during my recent visit, I saw several professionals grabbing hot rice bowls and continuing on with their busy days.

By embedding itself within daily routines, Aldi isn't just another store; it's engrained itself into Shanghai's urban fabric. This integration with the daily lives of customers fosters loyalty, turning new shoppers into repeat visitors.

Tech-savvy retail power

Shanghai's consumers are among the world's most digitally connected shoppers, and Aldi has tapped into this trend. The retailer introduced "scan-and-go" technology via its WeChat mini-program, allowing customers to bypass traditional checkout lines.

This aligns perfectly with the city's demand for frictionless, tech-enabled shopping. Aldi has also introduced a home delivery service that ensures products are delivered within a 3-kilometer radius in under an hour. This level of convenience highlights Aldi's dedication to adapting to the tech-savvy lifestyle of Chinese shoppers.

Aldi's commitment to local sourcing is another key element of its success. More than 80 percent of Aldi's products are sourced from Chinese suppliers. This not only supports local businesses but also ensures fresher products with shorter supply chains.

Aldi's private-label products make up nearly 90 percent of its inventory, eliminating the middleman and keeping prices low while ensuring product quality. This is vital in a price-sensitive, increasingly discerning market like China, where consumers trust Aldi to provide great value without compromising safety or quality.

Expansion beyond Shanghai: new frontiers

Building on its success in Shanghai, Aldi is now poised for broader expansion. On April 19, the retailer will open two new stores in the neighboring Jiangsu Province cities of Suzhou and Wuxi. Shopping habits in both places are similar to those in Shanghai, enabling Aldi to build on its success here easily.

However, as Aldi expands further, especially beyond the eastern Yangtze River Delta region, it may face increased competition.

Local players like Freshippo and Dingdong Outlets, which are adept at catering to Chinese consumers, could adopt similar strategies.

Freshippo operates 60 stores in Shanghai, with private-label products accounting for over 50 percent of its offerings. The retailer has also worked hard to expand its range of daily necessities, positioning itself as a strong competitor in the convenience, value-driven retail space.

To maintain momentum and thrive in China's diverse and rapidly evolving market, Aldi must fine-tune its region-specific offerings and strengthen links with local suppliers. China's vast food culture varies greatly from region to region. A "one-size-fits-all" approach will not suffice in a nationwide market of divergent consumer expectations.

For example, products popular in Shanghai, such as locally brewed craft beers, may not resonate as strongly in a city with a more traditional cultural identity, like Guangzhou.

In northwestern cities like Xi'an, where the cuisine leans heavily on wheat-based products, Aldi would need to expand its selection of noodles and breads. In Hangzhou, a city famous for its tea, more tea-related products should be on the shelves.

In southwestern cities like Chengdu, locals prefer spicy cuisine, so Aldi would have to adjust its product lines to include more Sichuan-style flavors.

Watching the bottom line

As Aldi continues to expand, it also faces the ongoing challenge of balancing profit margins with store growth.

The retailer will need to keep prices of daily necessities low to retain its price-conscious consumers, but that could put pressure on its bottom line as it seeks to finance new stores. In other words, Aldi must carefully navigate between expansion and profitability.

On the digital front, Aldi already has a solid foundation with its WeChat mini-program. To build on this, Aldi could add more personalized services, such as curated product recommendations, tailored promotions and a streamlined loyalty program. This would improve the user experience, increase customer retention and deepen brand loyalty.

Moreover, Aldi can leverage data analytics to predict consumer behavior more accurately. By understanding what consumers buy, when and why, Aldi could optimize inventory, offer timely promotions and create shopping experiences relevant to the local population.

(The author is an adjunct research fellow at the Research Center for Global Public Opinion of China, Shanghai International Studies University, and founding partner of 3am Consulting, a consultancy specializing in global communications. He has no conflict of interests to declare.)