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Discounter Aldi Opens First Enclosed Mall Store

In May, German discount grocer Aldi, which has been methodically opening new stores in company-owned, freestanding sites the United States for decades, did something it had never done before in this country. The company opened a new store in an enclosed shopping mall, the 833,000-square-foot Westfield Chicago Ridge in southwest suburban Chicago Ridge, Ill.

“The historical pattern for Aldi has been to buy land and build, but now we’re considering leased areas as well,” says Michael Jessen, division vice president of Aldi in its Valparaiso, Ind., office. “We’re looking for any and all ways to expand the company.”

The Chicago Ridge lease was about two years in the making, Jessen explains, the end result of a search by Aldi to replace an aging freestanding store in the town of Chicago Ridge. The company owned that property, but there was no room to expand. It was either a top-to-bottom renovation in exactly the same space, or find a new location.

“We examined all our location options carefully, as we always do,” Jessen says. “It took us a while to sort through the nuiances, but the more we looked at the mall location, the more it made sense.”

For the most part, the 20,000-square-foot location in Westfield Chicago Ridge is a lot like a prototypical Aldi elsewhere: familiar signage over the entrance, bright interior colors, and deposit-a-quarter shopping carts. Even the size is about the same as other U.S. Aldis. The main difference is that the store has no direct access with the parking lot. Customers must enter and exit through the mall.

Is that a concern for the retailer? Jessen says no. For one thing, the mall has created a total of about 75 “Aldi Preferred” parking spaces in separate areas outside of two of the mall’s entrances, marked to encourage Aldi shoppers to park there, and complete with shopping cart corrals (a third gathering point for carts is next to the store’s entrance in the mall).

More fundamentally, the company believes that the mall entrance will attract foot traffic to the store. “The mall itself is a base of potential customers,” notes Jessen. “Every day hundreds of workers and thousands of customers come to the mall. Even though we’re inside the mall, we were sure we’d get the vast majority of our existing Chicago Ridge customers to shop at the new location, though a few won’t come back. But they’ll be more than offset by new customers coming from the mall.”

So far, according to Jessen, foot traffic to the new Aldi has taken a boost compared with the freestanding location, including shoppers new to Aldi as a brand. In a few months, the company will be able to gauge more precisely how the mall location stacks up in terms of bringing new customers in the door, and how much these new customers are buying. The data will help Aldi assess the viability of locations in other shopping malls as opportunities arise.

Years ago, U.S. enclosed malls used to routinely feature grocery stores as major tenants. Even the fictional mall that the Blues Brothers so famously wrecked with their car included a Jewel, an instantly recognizable Chicago-area supermarket. But in more recent decades, grocery stores as mall tenants mostly dropped by the wayside.

For it’s part as a landlord, that’s a trend that the Sydney, Australia-based Westfield Group wants to reverse, at least at its own portfolio in the United States, which is currently 55 properties. The Chicago Ridge Aldi is the only the fourth mall-located grocer among its U.S. properties. Besides taking a space formerly occupied by a Steve & Barry’s, the new Aldi is part of Westfield’s drive to put “daily needs” retailers into its U.S. properties.

“Our goal is to bring back daily needs and services into our malls,” says Chris Barnett, Westfield’s senior vice president for development in the Midwest. “Grocery stores are a component, but not the only one, since others might be drug stores or gyms or dry cleaners. The important thing is to offer the convenience.”

Westfield has considerable experience with grocery stores in its malls, just not so much in the United States. According to Barnett, grocers operate in about 90 of the company’s properties, with most of them in its other markets — Australia, New Zealand, the U.K. Only six are in the United States.

“We have the benefit of global experience,” says Barnett. “There’s no reason grocery shoppers won’t buy at a regional mall. We’ve been focused on putting daily needs in our malls for a few years now, and we’re quite pleased with the results.”

In fact, Westfield has surveyed its shoppers and found that customers who come for groceries often stay to shop at in-line stores, even though they didn’t plan to. The reverse is also true: in-line store shoppers have a tendency to pop into the supermarket for a few items, such as for dinner on the way home. “We’re certain it’s going to work that way in the United States,” says Barnett. “And the results so far from the Aldi in Chicago Ridge are encouraging.” — Dees Stribling

This story is from the August 2011 issue of Shopping Centers Today.

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