German discounter eyes Swiss market

Aldi is hoping to make its mark in Switzerland Keystone Archive

Germany's discount supermarket chain, Aldi, is poised to enter the Swiss market, in a move consumers hope will lead to lower prices.

But experts warn that the company may struggle to make its mark in a country where two retailers control more than 70 per cent of the market.

Aldi – famous in Germany and elsewhere for offering a narrow range of discounted brands – has applied to Swiss cantonal authorities for a building permit.

The chain wants to open a SFr2.1 million ($1.7 million) branch in Romanshorn, in the northeast of Switzerland.

The plan is part of a strategy to open dozens of new stores throughout Switzerland.

Industry experts believe Aldi, along with its German competitor Lidl, will need to open more than 60 discount supermarkets to break even.

For established Swiss retailers such as Migros, Coop and Denner, the threat of such newcomers has triggered a price war.

Discount campaign

Denner, which is Switzerland’s third-largest supermarket chain, last week launched a campaign promising discounts of up to 30 per cent.

“The arrival of Aldi is not surprising for us. It was to be expected,” a Denner spokeswoman said last week.

Experts said the arrival of Aldi was long overdue in Switzerland.

“Migros and Coop hold 73 per cent of the [entire retail] market in Switzerland. Compare this to the situation in Germany, where five retailers hold only 62 per cent of the market, and you see how those two Swiss firms dominate,” Gotthard Wangler, a Swiss retail expert, told swissinfo.

However, Wangler said Aldi would not make an impact on prices in Switzerland for at least two to three years.

“Their biggest problem will be getting hold of building permits,” he said.

Aldi insists on building new stores complete with car parking on greenfield sites, usually on the outskirts of a city or town.

Local opposition

However, many local authorities are becoming increasingly opposed to new developments that increase traffic.

“Everyone is very sensitive to traffic, so local councils are reluctant to approve Aldi-style developments,” said Wangler.

French supermarket chain Carrefour is well aware of this problem.

Four years ago, the company said it planned to open between ten and 20 stores in Switzerland. To date, 11 have been opened.

“Switzerland is not a simple market and every canton has its own rules,” said Carrefour spokesman Michel Donath.

Planning permission may be a problem, but Aldi’s decision to test the Swiss market is unlikely to stumble because of a lack of consumer awareness.

Swiss families – especially those living near the German border – are familiar with the chain and its no-frills style.

Every weekend, Aldi’s shops are filled with hundreds of Swiss stocking up on bulk supplies of basic goods such as juice, milk and meat.

swissinfo recently visited an Aldi store just over the Swiss border in southern Germany. The car park was packed with vehicles from cantons Zurich, Aargau and Zug.

Piling them high

Unlike Migros and Coop, Aldi stores feature rows of stacked goods still in their packing crates. Customers unpack the products themselves, enabling the chain to offer lower prices.

Wangler says Aldi’s business model is based on offering customers a limited choice, but finding the cheapest suppliers and buying in massive volumes.

Aldi typically carries some 600 items, while Migros and Coop routinely stock more than 3,000.

It’s a business model that is clearly supported by budget-conscious consumers. Wangler estimates Swiss consumers export more than SFr2 billion this way every year.

Although he says Aldi and others will lose some of that cross-border revenue when they open their doors, the attraction of shopping outside Switzerland will remain.

Consumers hoping to see Swiss-based Aldi shops with prices equal to those in Germany are likely to be disappointed.

“They can never reach those price levels,” said Wangler. “So long as we have protection against imports of agricultural products into Switzerland, it won’t happen,” he said.

Another reason why Germany will continue to be popular is the oft-cited notion that Swiss consumers dislike being seen shopping on a budget.

“I think many Swiss feel that by going across the border they enjoy a sense of anonymity,” one regular border-hopping shopper told swissinfo.

swissinfo, Jacob Greber in Zurich

Key facts

Aldi is already present in 13 countries and has announced plans to open its first store in Switzerland.
Migros and Coop control 73% of the Swiss retail market.
Aldi sells around 600 products, while Migros and Coop offer around 3,000.