Supermarkets square up as Aldi opens shop

Customers already have more value for money in Swiss supermarkets Keystone

Swiss supermarkets have prepared for the arrival of German discounter Aldi on Thursday with a range of defensive strategies, according to retail experts.

Coop and Migros launched or expanded low-cost products in time for Aldi’s opening of four Swiss stores, while Denner strengthened its position with the acquisition of Pick Pay last month.

Aldi’s arrival in Switzerland has long been seen as a first step towards lower prices in Swiss supermarkets, where consumers now can pay twice as much as their neighbours for the same products.

Market leaders, Migros and Coop, have already launched cut price product ranges, and both profess to be well prepared for the onslaught of discount retailing.

Last week Migros boss Herbert Bolliger announced a bold strategy to expand the supermarket’s M-Budget selection from 350 to 600 products while strengthening its luxury line at the same time.

Bolliger also launched a counter-attack against Aldi and rival discounter Lidl – which is also expected to arrive in Switzerland soon – with plans to open up to 20 new Migros stores in Germany to supplement the three existing outlets.

Migros and Coop, which launched its own Prix Garantie budget line in January, appear to have copied leading British supermarkets that beat off discounters in recent years by offering a wide range of branded low-cost goods.

Aldi and Lidl have highlighted the fact that Swiss shoppers pay a much higher price for food shopping compared with Germany.

But analysts told swissinfo that discounts alone are not enough to win over Swiss shoppers in substantial numbers.

Quality and value

“The Swiss shopper wants quality and value for money – it’s not about low prices at any cost,” said Richard Perks, director of retail research at market research group Mintel.

“In Germany and Austria low prices are much closer to the top of the wish list than anywhere else. In Switzerland, shoppers look for more.”

Zurich Cantonal Bank retail analyst Marco Strittmatter acknowledges that Aldi’s arrival in Switzerland has already heralded changes, but he believes that quality will still play an important role in the market.

“The revolution has already begun and most of the impact is already behind us,” he told swissinfo.

“In Switzerland we used to have a price island, but even the threat of Aldi and Lidl arriving has made prices tumble.

“But it is increasingly important for supermarkets to cater for both the discount taste and the luxury end of the market.

“Customers in Switzerland will want to find bargains on one visit and then opt for luxury the next time around.”

German strategy

But where does this leave the German discounters? Strittmatter believes that Lidl may have got cold feet after watching the three largest Swiss supermarkets strengthen their position.

“The German two may become the German one. There is speculation that Lidl may have been scared off from coming to Switzerland,” he said.

“Aldi are testing the waters by opening a handful of stores at first. If all goes well they will expand, but if they are not successful then they will get out.”

Perks thinks the German discounters are here for the long-term and should be able to carve out a toe hold in the Swiss market.

“Looking at Europe in general, apart from Austria and Germany, hard discounters rarely take more than five per cent of the market,” he said.

“I would expect Aldi and Lidl to capture a low single-figure percentage of the market in due course. They are able and prepared to take the long-term view and suffer some losses at first to gain market share.”

swissinfo, Matthew Allen in Weinfelden

Key facts

Aldi opens four stores near the German border on October 27. The locations are: Weinfelden and Amriswil in canton Thurgau, Altenrhein in canton St Gallen and Gebenstorf in canton Aargau.
A basket comparison study of 177 articles by Fribourg University in 2003 showed that Swiss shoppers paid up to twice as much for supermarket goods.
Coop and Migros currently control 73% of the market share in Switzerland. Discounter Denner will have some 700 stores when its takeover of Pick pay has been finalised.