Aldi in China: Strategic Lessons for International Companies 2

2. Why Is Competition So Intense in China's Supermarket Market?

At the same time that traditional supermarket operators have faced pressure, new opportunities have emerged in discount retail. Driven by increasingly segmented consumer demand and stronger demand for value, China's discount retail market has experienced rapid growth.

According to Fooddaily (2026), China's discount retail market was expected to exceed US$29 billion by 2025, with annual growth of approximately 25%. The market's compound annual growth rate from 2022 to 2025 was projected at 11.0%, making discount retail one of the fastest-growing segments within the retail sector.

Bain & Company reported that the number of discount stores in China increased by 92% year-on-year during the first three quarters of 2025, representing the fastest growth among offline FMCG channels (SRI, 2026).

The market also remains relatively underpenetrated compared with more mature discount retail markets. Guangfa Securities (2026) estimated that discount retail penetration in China was approximately 10% in 2025, compared with more than 40% in Germany and over 30% in Japan. Huaxi Securities (2023) estimated that China's discount retail market could eventually support between 20,000 and 30,000 stores.

The growth of discount retail has attracted both local and international players.

For example, DL, a regional supermarket chain operated by a local private company, has expanded across one province with 15 stores in third- and fourth-tier cities. By November 2025, its annual sales had reportedly reached approximately US$3 billion (Weiwei, 2026).

Meanwhile, Sam's Club, operated by US retailer Walmart, generated more than US$19 billion in sales in China in 2025, representing year-on-year growth of approximately 40% (Yinshan,2026).

The attractiveness of the discount retail segment has also attracted major technology and platform companies. JD.com, Alibaba's Hema, Meituan, Didi and ByteDance have all entered or explored the discount retail space, intensifying competition among retailers and creating an increasingly diverse competitive landscape (SRI, 2026).

This suggests that China's supermarket market is not simply contracting. Rather, the competitive landscape is changing rapidly, with consumer demand shifting towards value.

The Shift from Traditional Retail to Digital Consumption

One of the major changes facing traditional supermarkets in China has been the rapid shift in consumer shopping behaviour towards e-commerce.

Since 2010, China has experienced rapid development in digital infrastructure, logistics and delivery networks, alongside high levels of consumer adoption of digital services. According to the China Internet Network Information Center (CNNIC, 2025), China had approximately 1.1 billion internet users by December 2024. Digital consumption has therefore become deeply integrated into everyday life. Guoqiang Ren, Senior Partner and Vice President for Greater China at Roland Berger, noted that customers had been shifting from traditional supermarkets towards e-commerce, with changes in consumer behaviour becoming increasingly structural rather than temporary (Liya, 2020).

At the same time, brands and retailers have developed multiple online channels, diverting part of the consumer traffic that traditionally flowed through physical stores.

The development of e-commerce therefore represents more than a new sales channel. It has changed where consumers shop, how they compare products and prices, and how retailers compete for customer traffic.

📌 Strategic Insight

The withdrawal or restructuring of international supermarket operators should not automatically be interpreted as a contraction of China's retail market. Instead, it reflects the significant changes taking place in the market and the difficulty of adapting established retail models to new consumer behaviours and competitive conditions.

At the same time, the continued expansion of both domestic and international retailers demonstrates that substantial market opportunities remain.

For international companies, the key question is therefore not simply whether the Chinese market remains attractive, but whether the business model can adapt quickly enough to changing market conditions.

A high degree of flexibility and responsiveness can help companies adjust their strategies as consumer preferences and competitive dynamics evolve. This includes adapting product offerings to changing demand, monitoring consumer behaviour and market data, and continuously reviewing the product portfolio.

The experience of Aldi suggests that consumer demand should remain the starting point for market adaptation. Rather than relying on a fixed business model, international companies need to observe changes in consumer behaviour and adjust their products, channels and positioning accordingly.

The subsequent performance of foreign-owned supermarkets and their local partners have varied. Sun Art Retail Group (RT-Mart) and Wumart, for example, have undertaken reforms in areas such as digitalisation and payment systems. Sun Art provides an example of how digital channels have become increasingly important to supermarket operations. According to Sun Art Retail Group Ltd annual report (2024), online sales increased by 11% year-on-year, the proportion of sales generated online increased from 24.2% in fiscal year 2022 (Sun Art Retail Group Ltd, 2023) to 27.6% in the fiscal year 2023.

Market Understanding / What Is Happening?

1. Why Are Foreign-Owned Supermarkets Struggling in China?

The performance of China's supermarket sector has become increasingly challenging. A survey of more than 10,000 stores operated by over 40 supermarket enterprises in 2024 found that fewer than 40% achieved positive sales growth (Yang, 2025). When Aldi opened its first stores in Shanghai in mid-2019, China's supermarket sector was already under significant pressure from the rapid development of e-commerce.

Over the past decade, several major international supermarket operators have reduced their presence in China or transferred their operations to local partners:

• 2014: British retailer Tesco withdrew from the Chinese market after China Resources Group acquired its Chinese operations, bringing its 10-year presence in China to an end.

• 2016: US retailer Walmart sold part of its Chinese store operations in exchange for a stake in JD.com

• 2017: Alibaba acquired a 36.16% stake in Sun Art Retail Group, the parent company of RT-Mart, for approximately US$2.9 billion (China Global Television Network, 2017)

• 2019: French retailer Carrefour and German retailer Metro entered strategic partnerships with Suning and Wumart respectively.

• Other international retailers, including South Korea's E-Mart and Lotte Mart, France's Auchan, and Thailand's Lotus, have also reduced or withdrawn their presence in the Chinese market.

3. How Has Aldi Built Its Position in China?

Aldi's development in China provides an interesting case study of how an international retailer can adapt its business model to these changing market conditions.

In 2017, Aldi entered China's retail market as an online retailer through Tmall Global, initially positioning itself as a supermarket specialising in Australian imported products.

In 2019, Aldi opened its first two physical stores in Shanghai, with imported products accounting for more than 60% of its product range.

The company's operating model subsequently evolved:

• 2023: Aldi operated 50 stores in China and recorded annual sales of approximately US$148 million. (Chu, 2025)

• 2024: Aldi operated 55 stores. Imported products had fallen to approximately 15%, while private-label products accounted for around 85% of its range. Annual sales reportedly doubled to US$296 million (China Chain Store & Franchise Association, 2025), while net profit margin reached approximately 3%, slightly above the industry average (Xiao, 2025).

• 2025: Aldi expanded to 88 stores and extended its presence beyond Shanghai into the wider East China region. Annual sales reportedly doubled again to approximately US$592 million. (China Chain Store & Franchise Association, 2026)

• 2026: Aldi announced plans to open a further 50 stores during the year.

The company's expansion is particularly notable because Shanghai is one of China's most competitive retail markets. Local supermarkets, grocery stores and Japanese convenience stores operate throughout the city, while e-commerce platforms have developed highly efficient delivery networks. Shanghai is also an important market for major retailers such as Alibaba’s Hema, US Sam's Club and Costco.

From Imported Products to Local Market Adaptation

Aldi's positioning in China has also evolved.

When it first entered the market, the company targeted China's growing middle-class consumer segment, with an initial focus on imported products and an emphasis on value. However, consumer behaviour changed during and after the pandemic, with greater emphasis on value and more rational spending. In 2023, Aldi adjusted its positioning towards "good quality at lower prices", placing greater emphasis on the combination of product quality and affordability (Si, 2025).

This evolution is important because it demonstrates that Aldi did not simply transfer its existing overseas model into China. Its product mix, positioning and operating approach changed as the Chinese market developed.