The Unusual Supects?

Walk into any Asda or Tesco and you’ll be able to find at least one PC for sale along with a bay or two devoted to computer accessories such as mice, keyboards and webcams.

However, while those two supermarkets, and to a lesser extent Sainsbury’s, have visibly been in the PC business for the past year or so, the likes of Aldi and Morrisons have continued to focus their marketing on food. That situation is changing fast.

In the weeks running up to Christmas, both Aldi and Morrisons joined their larger rivals in taking out adverts to promote their laptop and PC deals (see Best of the Bunch). But the question must be asked: are they really newcomers to the PC business? How long have they been part of the IT crowd? In the case of Aldi, a surprisingly long time – the retailer has been offering deals on IT products and computers for over ten years.

"Aldi first introduced PCs as a part of its weekly special buys range in 1998," explains a spokesman from Aldi’s computer buying group, who we are told cannot be named. "The special buys are in store on Sundays and Thursdays and offer exceptional quality products for a value price. There are a limited number of products available and they are available until they have sold out.

"The PC offers are extremely popular and they tend to sell out quickly. Aldi’s business model is designed to offer quality at the best value by stripping out unnecessary costs and passing the savings on to the customer," he adds.

But just what drove the supermarket to enter into the market at a time when its rivals were still concentrating on other non-food sectors? "We felt this model could be successfully applied to the PC market," clarifies the spokesman.

DEAL OF THE DAY
So why exactly is the firm’s offering becoming more prominent? "Aldi has grown in popularity and built a reputation for quality, and the customer has gained increased trust in the brand and service we offer. This means we’ve been able to steadily expand the computer offering in store," explains its buyer.

In particular, the retailers latest marketing moves were part of its Christmas push. "Our offer reflects key purchase times, including Easter, Christmas and the back to school period. The special offers have something for every PC user – from basic PCs to high spec systems, laptops, peripherals and computing accessories."

Morrisons has also been active in promoting its increased technology portfolio in recent months; however, much of this has focused on its video game and entertainment ranges. The rest of its non-food stock has, until now, been mainly homewares – as they tie in much more to its core food business than computers do.

Despite that, it recently broke the mould by offering Asus’ X58C Windows Vista laptop for under £250 as part of its ‘Big Price Crunch Week’ promotion in November (see Best of the Bunch). Speaking to PC Retail, a spokesperson for the supermarket said: "We’re committed to offering our growing number of shoppers great value whenever they shop with us. The Asus laptop is one of the great products we can offer our customers at fantastic prices."

NEW YEAR OFFERS
Despite Christmas being behind us, Aldi isn’t planning on taking its foot off the pedal. "During 2008, we had 12 computer special buy offers, which was a 35 per cent increase on 2007.

"Aldi will continue to offer PCs as part of the special buys range and there will be an average of one computer promotion per month planned for 2009. Aldi aims to offer promotions more frequently than in the past, with a broader range of specifications in order to meet all demands of the diverse computing market.

"Our special buys appeal to a wide range of customers from students or children looking for their first PC, basic family models, entertainment hubs for the digitally savvy customer, right the way through to portable laptops and notebooks for those on the move."

More worrying for its competitors are its expansion plans. Despite the recession, the firm is still planning to open up as many as 50 stores in 2009. "Aldi opened 50 stores this year and is planning on opening a similar number during 2009," added the buyer. "This means increased numbers for our suppliers, which will result in even better value."

SPECIAL RELATIONSHIPS
Indeed, part of Aldi’s success in moving forward has been its close ties with its suppliers and in particular fellow German company Medion. The vendor had limited exposure in the UK prior to Aldi’s decision to move into the PC market, but has since managed to become extremely visible through deals with other supermarkets and general merchandise retailers such as Woolworths. "Our close relationship with Medion allowed us to sell medium to high specification PCs at entry level pricing: something which was not available in the UK at the time of our move into the market," explains the Aldi spokesperson.

The moves by Aldi and Morrisons has also caught the attention of analysts; one is Verdict senior analyst Malcolm Pinkerton. He says that it is clear that both supermarkets are making moves into the technology sector, but stresses that both aren’t moving at the same speed, or necessarily in the same direction. "Technology isn’t the number one priority for Morrisons when it comes to non-food. Homeware is much more important to it as it ties in with its core offering of quality food. For the time being, I see PCs being more of an occassional offering. For Aldi on the other hand, technology is much more of a footfall driver."

Infinite Field Marketing Solutions’ Jason Evans also believes that, for the time being, both supermarkets’ offerings will remain confined to one off special offers aimed at driving footfall. "There is always room in the market for discount supermarkets to offer tailored products at the appropriate price points."

Pinkerton adds that it is unlikely that the channel will see Aldi or Morrisons emerge as rivals to Asda and Tesco, or independent retailers. "It’s very unlikely that it will turn over space to non-food SKUs on a permanent basis, for the short term at least. It has taken Asda and Tesco a long time to break into the PC and electronics sector with any success. It took a lot of effort to convince their customers that it was alright to purchase technology from a supermarket rather than a specialist retailer, especially while PCs and their accessories were still not understood by customers as well as they are today."

Even so, Pinkerton believes that Aldi and Morrisons might not face as much of an uphill struggle as its larger rivals in the IT space. "As the recession bites, consumers in particular will become much more price focused. A lot of customers these days are doing their research online, educating themselves about the products and then going and buying it at the retailer with the lowest price. In that way, the smaller supermarkets could make an impact if they have well priced SKUs, but for the foreseeable future, they will be special offers rather than a permanent fixture of their stock."

Evans feels that specialists and independents will continue to have a hold over the market: "National and independent IT specialists will still enjoy a consumer audience who require a greater choice of products, higher specifications or a more defined support service; something that a supermarket may not offer."