Dick Smith has laid the blame for closing his Australian-made processed food lines squarely at the feet of Aldi Australia.

He accused the German retailer of "extreme capitalism" and warned the CEOs of Woolworths and Coles that "unless your companies move towards [Aldi's limited range and high proportion of private brands], you will very likely become uncompetitive".

But this betrays a fundamental misunderstanding of Aldi's strategy and the limits of its appeal in the Australian market.

An important element of Aldi's strategy is a severely limited range of "preselected" products, overwhelmingly private brands. The company's smaller range (some 1,500 store-keeping units as opposed to 20,000 to 30,000 in a large Coles or Woolworths outlet) has several advantages — in terms of store footprints, warehousing infrastructure and supplier discounts, to name a few.

A proportion of these savings are passed on to consumers to ensure their appeal with households wanting to stretch their shopping dollars further.

Read more:

http://www.abc.net.au/news/2018-08-02/aldi-supermarket-coles-woolworths/...

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This is Gus' personal views (through experience):

To a great extend Dick Smith is correct, yet not quite right... But you can't say that to some journalists who have not understood how people can manipulate the market, or be manipulated by the markets. "Chocolate is chocolate, yet the taste is not the same", but for the price, you might compromise on a tad more or less "sugar" in the product.

I feel that Aldi is importing "surplus" (it's not the only one), like an old army store sells discarded diggers' shovels with a new label. Dumping (it's not dumping but "sourcing") under the guise of being cheap is not a strategy that will benefit Australia in the long run. Should we follow and completely adopt Aldi's market practices, all of our producers will go to the wall, like our white goods and car industries have done. We won't be able to feed ourselves.

Who knows, it could be good for the Aussie environment — going back to the wild? Towns such as Griffith, would become zombie towns though, unless they produce more vino than ever before...

The major thing that Dick Smith did wrong was to trust the Australian bleeding heart. He should know better. Pricing versus value is the principal determinant for moribunds like us to open our wallets... Shopping at Aldi's feels like shopping in third world countries or in a zombieland where goods are a bit cheaper (only a bit when you really compare) and not as "branded". At least Aldi's has gone a fraction up from the sheer warehouse of the Leclerc chains in Europe.

In fact local markets in Sydney, such as the Addison Road or the Carriage Works markets, offer much better value than the mausoleums of Aldi's for many fresh produce, directly from the producers, in a more pleasant atmosphere. There are many comparable markets in most cities and towns around Australia. I suppose it's a question of choice in our own mind — and being able to walk a bit more. 

A better way for Dick Smiths retail products would have been to offer a larger quantity for a smaller price. It's not that hard, considering that most of the cost incurred in products like jam and such comes from "bottling" or packaging. Trying to compete with imported products on the same scale is difficult — as from time to time, these products will be discounted in order to "move them off the shelves". Another point was the products labelling appeared "corny". In the 1980s, we tried the Aussie look for some products and they flopped. It's not the image people want to be associated with, despite being Aussies to the core. I never saw any Dick Smith's product discounted either. Discounting is part of the mass-market strategies. I know. I (we) practiced the technique for more than 30 years. Even "clean skins" wines such as red-ned can be fantastic value, but one needs to be savvy at selling and at buying so that margins are still profitable without killing the goose. "Creating a product" is not enough. One needs to become aware of the "consumer's" position — always looking for a bargain. It does not have to be "extreme capitalism", but having the guts to also advertise in ways that are far more subtle than the big products manufacturers do.

My views...