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China: Aldi starts second stage of expansion in China

Discount Retail Chain Aldi dares to do business in China after six years, now beyond Shanghai’s city limits. But the step is not without risk.


Wuxi, in Jiangsu Province, a 45-minute train ride from Shanghai: In the newly opened “Harmony City” shopping center, the glowing Aldi Süd logo shines on the wall, with a promotional stand in front of it. Employees in orange vests hand out toothpaste sets and tissues to passersby who register via QR code.


He Jing stands in front of the new Aldi branch, set to open on April 19. “My impression is positive,” says the 25-year-old barista. She knows the German brand from her time in Shanghai, she explains. She likes the product range. As a single person, she also appreciates the package sizes, which are just right for individuals. In other stores, the quantities are often too large.


On this day, promotional staff from the German discounter vie for the attention of passers by in the moderately busy shopping mall. In Wuxi, a city of millions that ranks among China’s wealthiest and highest-income cities, Aldi is still unknown. This branch is the first outside Shanghai. But it could become the starting point for a broader expansion of the German retailer in China.


According to German Handelsblatt sources, another branch outside Shanghai is set to open on the same day, in Suzhou, located between Wuxi and Shanghai. Aldi Süd declined to comment on the matter. “We don’t comment on this topic,” the company said in a written response.


The move into Shanghai’s surrounding areas was long overdue, says Marc Houppermans, a former top manager at Aldi Nord. Today, he advises retailers as an Executive Partner at Discount Retail Consulting, including on building discount operations in Asia.


However, he doesn’t see the expansion as a guaranteed success. “Now comes the next phase, where they must test whether the Aldi discount model developed for cities also works outside the modern metropolis of Shanghai,” he emphasizes. Houppermans is confident, though, that more branches will follow if this test in Wuxi and Suzhou succeeds.


Aldi Süd already has more than 60 branches in Shanghai

So far, Aldi Süd has only operated its stores in Shanghai. In April 2024, the company reported 56 branches; estimates now suggest the number is between 60 and 70. Here, too, the secretive company remains tight-lipped. But until now, Aldi Süd had not ventured beyond Shanghai’s city limits.


Since entering the Chinese market in 2019, expansion has been a recurring topic. Three years ago, Roman Rasinger, head of Aldi’s China operations, told Handelsblatt in an interview: “China is and remains one of the most interesting markets in all areas,” with “huge potential in the food market.”


Aldi’s China offensive: The discounter plans hundreds of new stores

Back then, he hinted at growth beyond Shanghai. The Yangtze Delta, with over 100 million inhabitants, was a priority for Aldi. Even for Shanghai alone, Aldi saw the potential for “a three-digit number of stores.”


Aldi has great capacity to “fill white spots on the supply map,” Rasinger predicted. Only now, however, is the company taking its first tentative steps in that direction.


German retailers like Obi and Lidl have failed in China

It’s not surprising that Aldi Süd waited so long to expand: “The Chinese market is highly competitive and changes quickly,” Aldi Süd stated in 2024.


Unlike in Germany, the company didn’t position itself as a low-budget discounter in China but initially targeted higher-income groups. Now, Aldi Süd positions itself in the mid-range, appealing to the growing middle class with “high quality and affordable prices.”


The Chinese retail sector is fiercely competitive; many European players have failed due to the cutthroat pricing of rivals. In Shanghai, you can still occasionally spot logos of the French upscale supermarket chain Carrefour, which has long since withdrawn from the Chinese market.


The German hardware chain Obi failed, as did Aldi’s competitor Lidl, which gave up after a two-year online attempt. One challenge is China’s diversity: For instance, culinary preferences vary greatly by region, requiring regionally tailored product ranges.


In Shanghai, China’s wealthiest and most affluent city overall, Aldi branches compete fiercely with the Hema chain, backed by Chinese internet giant Alibaba, as well as U.S. chains Costco and Sam’s Club, a Walmart offshoot.


To survive here, profitability must be closely monitor and for each store and unprofitable ones closed if necessary. That’s exactly what Aldi Süd did in Shanghai’s Putuo district in 2024, as the company confirmed last year. Elsewhere, expansion continues.


Aldi collaborates closely with delivery services in Shanghai

For Aldi Süd, the years since its 2019 market entry have been challenging. A burst real estate bubble and the aftermath of Shanghai’s two-month COVID lockdown in 2022 have dampened Chinese consumer sentiment long-term.


Add to that a retail sector that has rapidly digitized, increasingly becoming an online delivery service. In Shanghai, scooter couriers from major providers like Meituan and Ele.me deliver Aldi bags to doorsteps late into the evening even at 11 p.m. if requested. Orders are placed via smartphone, Aldi branches prepare the items, and couriers navigate through traffic, even in pouring rain.


China

Handelsberater Bodo Kluxen sees this bridge to e-commerce as one of Aldi’s strengths. The brand leverages digital promotions, loyalty programs, and mobile payment solutions to enhance the shopping experience, says Kluxen, who also teaches marketing and intercultural management at the Baden-Württemberg Cooperative State University.


Another strength is the extreme cost efficiency in the supply chain. The high proportion of private-label products ensures low costs while maintaining quality control.

But Kluxen sees this as the biggest challenge for expansion beyond Shanghai. “Developing new markets requires efficient management of logistics, transport, and inventory to avoid shortages or overstocking,” he says.

Consultant Houppermans expects Aldi to “focus first on the urban region and Shanghai’s surrounding areas for logistical reasons.”


Trust in the “Made in Germany” brand

The new Wuxi branch isn’t yet accessible. But a typical Aldi store can be seen in Panlong, on Shanghai’s western outskirts. It’s an entertainment and shopping district styled like a historic water town, common in the metropolis and its surroundings, with a river, curved bridges, winding alleys, and souvenir shops.


At the entrance to this newly built area, an Aldi Süd branch targets passers by from China’s middle class who can afford the district’s pricier restaurants.


In the aisles, you’ll find Chinese specialties like mussels and packaged chicken feet 400 grams for about 2.70 euros. It’s pricier than at local markets but hygienically sealed and packaged. Food safety remains a major concern for Chinese customers, who recall past milk and meat scandals and thus trust the “Made in Germany” brand.


A shelf over, there are German and Alsatian wines Riesling and Gewürztraminer plus beer in plastic bottles, brewed “German-style.” A closer look reveals the beer comes from neighboring Anhui province.


Aldi uses a high share of local products to secure supply chains and cut costs while catering to Chinese tastes. For those craving authentic German flavours, the hot food counter offers ready-to-eat pork knuckles, sausages, and grilled meats.


“The expansion of Aldi in China underscores the enormous potential for discounters that can balance quality and affordability while adapting to local market conditions,” explains consultant Kluxen.


He sees the discounter as a model for other retailers looking to enter the Chinese market, demonstrating how to strategically penetrate a highly competitive market and build long-term success.




 
 
 

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