(Yicai) Nov. 5 -- German supermarket chain Aldi has ramped up its expansion in China, targeting 150 stores across the country by the end of the year, according to the chief executive officer of its Chinese business.

Aldi will open a total of 60 new stores in China this year, compared with an average of about 30 in previous years, Jacqueline Chen told Yicai in a recent interview.

Aldi operates more than 10,000 stores in over 10 countries. It entered the Chinese market in 2019 and now has more than 70 outlets in Shanghai and over 50 in the southern region of Jiangsu province, according to the company’s official website.

Aldi China will increase its supply chain investment to back the expansion of its hard discount model, Chen said. The firm recently opened its third major warehouse in East China in Nanjing, which will enable faster store roll-out across the region.

“Supply chain capacity must be built before entering a new market,” Chen explained. “Under the hard discount model, we aim to improve the balance between efficiency, costs, flexibility, and resilience.”

Most Aldi stores are compact community supermarkets of roughly 1,000 square meters, stocking around 2,000 stock-keeping units, and more than 90 percent of their goods are private-label products, including items with blockbuster potential. The high share of private-label goods allows Aldi to cut out the middlemen via its supply chain and build price advantages, Chen noted.

Despite headwinds across the whole retail sector, membership warehouse clubs and discount supermarkets stand out as the two most successful formats. Both are centered on ‘value for money,’ but the former targets more mid-to-high-end customers, while the latter draws shoppers primarily seeking low-priced items.

Discount supermarkets generally cap SKUs at between 1,000 and 2,000 and carry heavy private-label assortments to drive foot traffic through low prices. Goods priced at around CNY10 (USD1.49) are a core selling point.

About one-quarter to one-third of products at Aldi supermarkets are priced below CNY10. Competitors such as Kinglomo, Mart Fresh, and Sanjiang Shopping Club also sell a wide range of goods around that price point.

CNY10 can be seen as a psychological price anchor. Merchants commonly set prices from CNY9.90 to CNY12.90 (USD1.48 to USD1.93) to trigger impulse purchases of “one extra item.” Complaints about the quality of these items remain limited, as long as quality meets basic expectations, a senior industry insider specialized in product development and procurement told Yicai.

Impulse buying drops sharply once the item price exceeds CNY13, which explains why discount supermarkets set most of their price tags at around CNY10, the insider noted.

Editors: Tang Shihua, Futura Costaglione