Kaufland is not the new Aldi. It is ... weird

IT SELLS everything from chocolates to TVs and is 15 times bigger than Aldi. This is why Aussie shoppers should take note.

YOU can be forgiven if you’ve never heard of Kaufland, the big supermarket chain that’s coming to Australia.

Kaufland is big in Bulgaria. And also Poland. In fact, it has never before opened a store in an English-speaking country.

It is not like Aldi. For one thing, Aldi is a proven hit. It has successfully opened stores all over the UK, Europe and America. Kaufland is big, but only in a small chunk of central and eastern European countries.

Also, Kaufland stores are huge. Up to 20,000 square metres. That’s up to 15 times bigger than an Aldi and five times bigger than a big Coles or Woolworths.

Finally, the Kaufland range is different to Aldi. They are both cheap, but Aldi only stocks around 1300 different items, mostly their own brands. Kaufland has more like 40,000, according to consultants McKinsey, and it sells real brands.

But of course Vodka would be cheap over there. FYI, 1 euro is worth about $AUD1.39 right now.

On special this week in Germany are Ferrero Rocher chocolates, Samsung TVs, Coca Cola, and Absolut Vodka. It also sells everything from ladders to kettles, modems to smartphones.

It is more like the American retailer Costco than Aldi in that respect, albeit without memberships.

So Kaufland is not just an Aldi clone. And that is a risk for it. Aldi is a proven model. It is not obvious Kaufland will be a success in Australia, nor what made the Kaufland management decide Australia is their next best location for expansion.

Kaufland, which began in West Germany in the 1980s has really only expanded into former communist countries. It is very popular in Romania, for example, but it hasn’t tried to compete in Austria or France, Switzerland or the UK.

So, why is it coming to Australia? (Maybe the lack of competition in our Coles-Woolies duopoly reminds it of the Soviet era?!) It is a distinctly weird move.

Inside one of Germany’s massive Kaufland stores.

KAUF IS GERMAN FOR PURCHASE

Unlike Amazon and Lidl, which have been flirting with Australia for ages but not showing much in the way of signs of actually doing anything, Kaufland is all action. It is actually taking steps to get its doors open in Australia.

You can apply for a job with them right now on their Australian website. They want to hear from property developers, administrative assistants, and architectural planners, although they’d like it if you spoke German.

(At the very least, knowing that Kauf is German for purchase can’t hurt. Land is German for Land, btw.)

LIDL BY LIDL?

The Schwarz Group, which owns Kaufland, owns Lidl too. Why not open a few Lidl stores and try to cut Aldi’s lunch? Are they frightened of Aldi? Or is the Kaufland move a way to try to establish scale so that they can then launch Lidl with a lower cost base?

The decision to open Kaufland in Australia comes after a long analysis at Schwarz Group. Perhaps they decided the discount supermarket space is getting too crowded. After all, Coles and Woolworths have tried to emulate Aldi by adopting private label brands and cutting their prices. Perhaps they think there is more room to really take over Australian shopping by offering a really wide range.

If Kaufland are right and they are able to open a lot of stores it will pose a seriously tough question for Coles and Woolworths. On one side they may be being killed by a small retailer with a small, private label range (Aldi) and on the other side by one with a big range of real brands (Kaufland).

But really, Coles and Woolworths should be able to beat back a competitor without any experience running operations outside Europe. If they can’t it will be proof that our supermarket competition has been little better than the old eastern bloc.

Jason Murphy is an economist. He publishes the blog Thomas The Thinkengine. Follow Jason on Twitter @Jasemurphy

Originally published as Kaufland is not the new Aldi. It is ... weird