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Aldi Expands in Central Ohio

COLUMBUS, Ohio - In the wake of Big Bear's close, discount grocer Aldi intends to move aggressively into the competitive central Ohio grocery market, the Columbus Dispatch reports.

The privately held German chain has plans to open a store in Columbus in July and to open stores in four other central Ohio locations in 2005, according to Dan Gavin, Aldi's divisional v.p.

The stores will follow the company's format of offering grocery items -- normally house brands -- at prices 25 percent to 50 percent lower than name brands at conventional grocers.

Although the majority of Aldi's stores are in urban areas, the company intends to expand into the suburbs, Gavin said.

"People stereotype us as not being mainstream, but we have stores in the same area other grocery stores are located," he said. "We're now looking at more-mainstream, bedroom [communities], which are some of the fastest-growing areas for us, as more Americans are moving toward value-driven stores." With 15 central Ohio stores, the retailer has a 6 percent market share, making it fifth in the area in terms of sales, according to Scarborough Research.

Analysts think Aldi's untraditional price and store concept is a draw for the chain, and its growth potential -- especially for the next five years -- is impressive.

"The demand is quite strong,"said Jason Whitmer of FTN Midwest Research in Cleveland. "Aldi's concept works better than the average grocery market because it's an inviting store, it's cheap, and people have pretty meaningful savings on their grocery budget." The chain is also able to compete effectively against such heavyweights as Meijer and Wal-Mart, Whitmer added.

"Aldi is one of the few stores that have been able to compete successfully with Wal-Mart because of its success in pulling out the blue-collar demographic," he said. "They will also do pretty well in suburban markets because more and more, people are looking for a good deal."

Aldi keeps its overhead low and profits high by providing inexpensive products at the expense of convenience. Customers must insert a quarter into a shopping cart to be able to use it, and pay a nickel or dime each for grocery bags. Shoppers pack their own groceries.

Selection is much more limited than at other chains. Aldi normally carries only one size of 1,000 of the best-selling consumer items, significantly less than most other grocery stores. That lets Aldi buy cheap, increase order volume, and cut handling costs and waste, Gavin explained.

Aldi additionally doesn't have labor-intensive, high-waste departments, like a fresh-meat counter or a bakery, instead providing frozen meat, a limited produce selection, and packaged bakery items.

Aldi has looked at some former Big Bear stores for possible new store locations, but the company says the stores are mostly too large. Aldi stores usually are 12,000 to 15,000 square feet, while Big Bear stores were 30,000 square feet or larger. Aldi would like to attract ex-Big Bear customers, though.

"We haven't done anything to get them, but word of mouth will get them to check us out," Gavin said. "We stick with what we do in all our stores -- be quiet and let our stores speak for themselves."
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