Why Is Aldi Succeeding in China? 2

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

Although traditional supermarket operators have come under pressure, the discount retail segment has created new opportunities. Driven by stronger demand for value, China's discount retail market has grown rapidly.

Fooddaily (2026) estimated that China's discount retail market would exceed US$29 billion by 2025, with annual growth of approximately 25%. It also reported strong growth during the period, with a projected compound annual growth rate of 11.0% from 2022 to 2025, making discount retail one of the country's fastest-growing segments.

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

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

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

DL, a privately owned Chinese supermarket chain, had expanded across one province with 15 stores in third- and fourth-tier cities and reported annual sales of almost US$3.5 billion by November 2025 (Weiwei, 2026).

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

JD.com, Alibaba's Hema, Meituan, Didi and ByteDance have also entered or explored the segment (SRI, 2026).

The competitive landscape is changing rapidly, with consumer demand shifting towards value.

The Shift from Traditional Retail to Digital Consumption

A major challenge for traditional supermarkets in China is the rapid shift in consumer shopping behaviour towards e-commerce.

Since 2010, China has rapidly expanded its digital infrastructure, logistics and delivery networks, while consumers have widely adopted digital services. The China Internet Network Information Center (CNNIC, 2025) estimated that China had approximately 1.1 billion internet users by December 2024, indicating that digital consumption is deeply embedded in everyday life. Guoqiang Ren, Senior Partner and Vice President for Greater China at Roland Berger, observed that consumers were moving from traditional supermarkets to e-commerce and that this behavioural shift was becoming structural rather than temporary (Liya, 2020).

Brands and retailers have developed multiple online channels, diverting some of the consumer traffic that traditionally flowed through physical stores.

E-commerce is therefore more than an additional 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. It more accurately reflects a market undergoing substantial change, in which established retail models must adapt to new consumer behaviours, digital channels and competitive conditions. The continued expansion of domestic and international retailers shows that significant opportunities remain.

For international companies, the central question is not simply whether China remains attractive, but whether their business models can adapt quickly enough.

Aldi's experience suggests that consumer demand should be the starting point for market adaptation. This requires an operating model that is flexible enough to respond as consumer preferences and competitive conditions evolve.

In practice, companies need to use consumer and market data to review their product portfolios and adjust their offerings over time rather than rely on a fixed business model.

The performance of foreign-owned supermarkets and their local partners have varied. Sun Art Retail Group (RT-Mart) and Wumart, for example, have pursued reforms in digitalisation and payment systems. Sun Art's results highlight the growing importance of digital channels: according to its 2024 annual report, online sales rose by 11% year on year, while online sales as a share of total sales increased from 24.2% in fiscal year 2022 (Sun Art Retail Group Ltd, 2023) to 27.6% in fiscal year 2023.

Market Understanding / What Is Happening?

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

China's supermarket sector has become increasingly challenging. By the time Aldi opened its first stores in Shanghai in mid-2019, rapid e-commerce growth was already intensifying these pressures. A 2024 survey of more than 10,000 stores operated by over 40 supermarket companies found that fewer than 40% achieved positive sales growth (Yang, 2025).

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, ending its 10-year presence in China.

• 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 from the Chinese market.

3. How Has Aldi Built Its Position in China?

AAldi's development in China provides a useful case study of how an international retailer can adapt its business model to changing market conditions.

In 2017, Aldi entered China's retail market 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 the 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.

Aldi's positioning in China has also evolved.

Aldi initially targeted China's growing middle class through imported products and a value-oriented proposition. However, consumer behaviour changed during and after the pandemic, with greater emphasis on affordability and more rational spending. In 2023, Aldi repositioned itself around "good quality at lower prices", combining product quality with affordability (Si, 2025).

This shift shows that Aldi did not simply transfer its overseas model to China. It adapted its product mix, positioning and operating approach as consumer demand and competitive conditions evolved.