Aldi is launching into eCommerce in early 2016 as part of its long-term growth and investment strategy in the UK.

The grocer is dipping its toes in the water by selling wine by the case followed by non-food special buys in the spring, as well as offering customers a choice of home delivery or click & collect from third party locations.

But a key part of the announcement is the retailer has not said whether it will offer fresh groceries online – a sign it is thinking carefully about its eCommerce proposition and not jumping in head-first.

Making money from eCommerce groceries is notoriously difficult, Bryan Roberts, SVP and knowledge officer for EMEA at Kantar Retail wrote in a piece for Essential eCommerce last month. "Online grocery (be that home delivery, click & collect, or both) is probably better seen as a hygiene factor, a basic cost of doing business that enables a retailer to meet an evolved set of basic shopper expectations. If online eventually makes money, then great; if not, well it’s simply a necessary evil that is part and parcel of twenty-first century grocery retailing," he said.

If this is Aldi's necessary evil, by avoiding fresh groceries and concentrating on more profitable goods like wine and non-food, the grocer will create an online presence, while keeping an eye on its bottom line.

In fact, the announcement comes as the discount grocer revealed its full year financial results ending December 2014. While Aldi reported a surge in sales over the year from £5.27 billion to £6.89 billion, profits fell 4% to £260.3 million.

Matthew Barnes, CEO of Aldi UK & Ireland, said the online launch will enable the grocer to "introduce the Aldi brand and some of our best-selling, best-quality and best-value products to thousands more customers across the UK".

“Our focus on offering the best-quality products and range at unbeatable, straightforward prices is bringing more and more shoppers through our doors, helping us to achieve consistent market-leading growth in sales," he said.

“As the grocery market continues to evolve, our unique model, operational efficiency, private ownership and financial strength mean we’re able to keep investing in our business – from people and presence to products and prices.”

Discounters left behind

Rob Fenton, UK MD of business data agency, fifty-five, noted the discounters have been the last to joint the online retail revolution, with Poundland's eCommerce website only launching earlier this month.

"Some big names, such as Primark, don’t yet offer internet shopping. What Aldi’s online expansion highlights starkly is that we’re now in an era where online and offline shopping should not be separated by retailers. Either evolve, or become extinct," said Fenton.

But Catherine Shuttleworth, CEO of retail and shopper marketing agency, Savvy, said the eCommerce announcement was not expected.

"Few would have been surprised to see Aldi’s strong set of trading results for 2014. The retailer’s market share performance has been phenomenal and its store opening programme has allowed it to reach new shoppers up and down the country," she explained. "What was less expected was the retailer’s announcement that it is to launch an online business next year, starting with wine and then non-food. Some might argue that such a venture could be a distraction from an existing business model which is currently firing on all cylinders, but we see this as a shrewd move. "

She said Aldi is wise to start with wine and non-food. "These categories will be less margin dilutive than a full grocery home delivery service," she added. "It’s also worth mentioning that wine has served an effective category to draw in new, particularly lucrative more affluent shoppers, to try their stores. Its eclectic range of non-food products has been a staple footfall driver for Aldi for many years, and we believe it can attract online traffic too.

"Finally, at a practical level, both wine and non-food can be run independently from its existing core supply chain. This will minimise complexity and prevent potential distractions from a core business which still has substantial scope for further growth," she concluded.

eCommerce tipping point

Meanwhile, Rupal Karia, managing director of retail and hospitality for Fujitsu UK & Ireland, said this launch demonstrates a tipping point in the industry.

"Aldi’s physical stores have been hugely successful – noticeably so at a time when competitors struggled. This launch is the latest step in the discount retailer’s growth and is a savvy one. We are now seeing a tipping point where it is becoming a viable option for discounters to offer online services, if not for all but certain product lines. It will be interesting to see if Aldi goes down the Poundland route of charging for deliveries below a certain value, or if the product ranges chosen for online can hold their value with the cost of delivery included."

Profitability difficulty

Meanwhile, Darryl Adie, managing director of eCommerce agency Ampersand, said Aldi will struggle to maintain a click & collect offering. "As Tesco’s fairly recent decision to raise its click & collect threshold shows, the slim margins that click & collect operates on can make it costly for even the major retailers.

“The growing trend of discount retailers such as Poundland, and now Aldi, moving into multi-channel retail is an interesting one. These retailers are betting on the economies of scale and if consumers respond well to their respective online offerings, we could see some major shifts in the retail landscape.”

Adie also said Aldi might struggle to make a profit if it decides to expand its product offering beyond cased wine.

"Average order values of £10-£30 on a few items is profitable on a per order basis online and means that the product’s profit margin covers the cost of the logistics as well as shipping. Cased wine fits into this model, however, if Aldi does begin to offer other items such as groceries, offering items individually makes profitability harder to maintain."

But he said value retailers such as Aldi are increasingly turning to multichannel because they recognise the potential of reaching a whole new tranche of customers.

"Having seen the major players such as Tesco already make their errors in this space, perhaps the value retailers are hoping to learn these lessons and avoid similar mistakes.”