How The Reject Shop and other specialist retailers are also feeling the heat from Aldi

Aldi ordered to pay former manager more than $37,000 following unfair dismissal case

It’s not just supermarkets that are feeling the sting of Aldi, as specialised retailers and discount stores are also seeing the German retailer affect their businesses.

Australian discount retailer The Reject Shop is feeling the pressure from Aldi’s rapid Australian expansion, with its stores in Western and South Australia facing reduced sales in the second half of the 2015-16 financial year. It comes on the back of Aldi’s expansion into those states, with Aldi stores opening in SA in February, and in WA in June.

The Reject Shop’s managing director Ross Sudano told news.com.au Aldi “has definitely changed consumer patterns in the market”, and that it will take a “period of time” for the patterns to settle down.

The Reject Shop posted its full year results last Wednesday, reporting 5.7% growth in revenue across its 341 stores. However, sales in the second half of the financial year grew at a slower rate of 1.3%, down from 4.4% in the first half.

“The second half, for us, was quite a challenging half. So we had really good momentum into Easter and then once Easter arrived, and it arrived early, the momentum of consumer confidence seemed to change,” Sudano said.

The Reject Shop has 29 stores in Western Australia and another 29 in South Australia. The company reported a 1.9% gross profit margin fall across the last financial year, citing a lengthy election campaign as one of the factors that reduced consumer activity.

Aldi’s “unexpected” influence

Other retailers have also been paying attention to Aldi’s undertakings, with hardware retailer Bunnings also admitted to taking note of the German retailers weekly deals.

Bunnings Australia managing director Michael Schneider previously said Bunnings sees a spike in its website traffic each week that coincides with Aldi’s weekly Special Buys catalogue release.

“It’s good for us because competition drives you to go harder at what you want to do,” Schneider told investors in June.

Gary Mortimer, retail expert and associate professor at Queensland University of Technology Business School, told SmartCompany Aldi’s impact on these non-grocery retailers is “unexpected.”

“What we’re seeing is the unintentional impact of what Aldi is doing to other retailers,” Mortimer says.

“I think originally the supermarkets underestimated Aldi. They market themselves for food, but they also have a very successful merchandise and apparel department.”

It is this department that’s challenging “third-tier discounters” such as The Reject Shop, as Mortimer believes some of the products at Aldi “reflect what’s sold in The Reject Shop”.

“These third-tier discounters and dollar stores have a range of apparel and merchandise that are similar to what Aldi now offers,” he says.

“Cleaning goods are also a crossover between the two, and these discount retailers can expect to take a hit thanks to Aldi’s offerings.”

Mortimer believes discount retailers should look at their core products and “sharpen up” their prices if there is too much correlation.

“These discounters don’t operate heavily on weekly discounts like Aldi does, so they should focus on comparing prices with Aldi and trying to at least match them,” Mortimer says.

The “Aldi effect” on incumbent retailers is a significant “blip on the radar” says Mortimer, referring to Aldi’s big sales on products like ski wear and bicycle gear.

“People hold out for Aldi’s yearly skiwear sales, and now they’re starting to do the same with cycling goods,” he says.

Mortimer believes retailers in sectors such as skiwear and cycling, will also begin to feel the heat. But Belinda Haley, owner of Bumps Ski and Surf in the Melbourne suburb of Glen Huntly told SmartCompany the specialist store is yet to see Aldi’s promotions affect sales.

“We’re a premium store, so it hasn’t affected sales all that much,” Haley says.

“We’ve more seen an impact in the amount of people hiring ski gear, less people are hiring because more people can get cheap skiwear at Aldi.”

Haley has noted Aldi’s date for its skiwear sale has coincided with Bumps’ yearly sale for the past two years, but doesn’t know if it is intentional.

“We’ve always been on the third weekend in May, and they’ve copied that date for the last two years,” she says.

SmartCompany contacted The Reject Shop but the company said it has “nothing further to add on the discussion about Aldi”.

SmartCompany contacted Aldi but did not receive a response prior to publication.

Trending

COMMENTS

Subscribe
Notify of
guest
3 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Annette Scott
Annette Scott
4 years ago

Well, I suppose this just means that there is a bit more competition around now and that the big names need to lift their game by lowering their prices. We are paying such exorbitant prices for so many products compared to the prices consumers pay in other countries – it will be good to start getting a fair go!

David Shopper
David Shopper
4 years ago

Reject Shop does not sell the products that originally made it famous. Reject now sells product lines that competes with established retailers, such as Woolworths, Coles, Myers and Bunning.
Reject has lost its originality of being Reject.
From Reject, we cannot buy: fluorescent light bulbs (very popular); functional brooms such as brooms to sweep concrete surface; white plastic coat hangers popular design that no other retailers can compete; DVD casings of high quality; bulk blank DVDs; computer carrying bag; office stationery; garden lobbers; and most important of all are the “niche” product that are not sold by other established retailers.
“Go-Lo” retailer sells Reject shop products, but “Go-Lo” stores are hard to find, where are they?
I used to love to shop at Reject and always come out with more goods purchase than I set set to buy.
Now, I come out of Reject with a “grumble” because they do not sell the products I set out to buy.
Reject has changed. Reject has lost its character.
It is no longer a “niche” shop as the original meaning of “Reject”.

2ontrack
2ontrack
4 years ago

The Reject Shop, as Mortimer believes some of the products at Aldi “reflect what’s sold in The Reject Shop”. The company reported a 1.9 per cent gross profit margin fall across the last financial year.