You've probably seen the announcement that Aldi, the German retailing giant with a reputation for cheap prices and cheaper imitations of famous brands is getting into mobile phone plans. There's a couple of rays of sunshine in the offer, but the offer is behind where Aldi normally likes to position itself.
Aldi has brought a lot of good and bad to the Australian retail market, something which needs to be kept in the context of other major retail players who are lobbying right now to plead innocence against the accusations of unconscionable conduct and abuse of market power.
The Good: Aldi's price innovation has give purchasing power to a broader range of people. For example two years ago, the Australian ski slopes were full of kids in Aldi ski gear after a flash sale they ran on their own ski gear, with very low prices for surprisingly good gear. With little to no R&D costs and a quick template copy of the major brands in the ski gear market, Aldi rushed out some fine clothes for kids. Making ski clothes cheaper so that more families can afford to kit out their kids and take a holiday is hard to argue with.
The Bad: The obvious negative is that if you're a business who has endured the risks, R&D costs, experimentation, marketing and brand building costs to get a successful product established and finally profitable and then Aldi wants to be in this game too, they'll imitate you quickly, take what you've done and undercut you at a cheaper price.
Aldi has often been first to the dirt cheap offer in a product category but not this time. Aldi's mobile plans could have provided a very aggressive shake up to the Australian mobile market, if they were launched two years ago. It was two years that amaysim starting capturing well over a hundred thousands of customers and it was just 3 months ago that the ultra competitive Kogan Mobile plan was launched which quickly exploded with sign ups.
If Aldi were earlier they could have also beaten the very compelling offers from Vaya and RedBull and Lebara. However the Aldi Mobile offer launches in the middle of the pack which is at odds with the hyper price competition (lowest in market / 'switch to us' and save) branding that Aldi uses. It's a switch to us message with disclaimers now..a 'switch from selected providers' and save message that is out of step with the regular brand.
To see how Aldi stacks up head to head with these providers and why they are actually 4th (5th if you count Lebara) in the market for Unlimited mobile plans, check out our full comparison of their unlimited plans against the rest.
All told, these MVNO SIM Only providers have carved out a great nice for themselves (Live Connected now also offers very competitively priced handsets) and Aldi wants in. Collectively these new SIM Only MVNOs offer services to over 350k subscribers, and far more if you bring in the SIM only offers from TPG, Dodo, iiNet and other broadband providers. However, these subscribers are heavily price and service sensitive and are contract free and therefore easily switched.
The market has matured, amaysim's launch of its unlimited plan was free of any 'special offers' on launch and during their growth phase, yet for the past 6 months they've used a range of flash sale offers like '40% off the first order' to get more customers in the door. This represents a potential maturation of customer growth and shows the impact of cheaper and broader offers in the market. This SIM Only (no contract) market is easily switchable and Aldi could do something very integrated with its supermarkets to make the offer stickier over the long term to retain the customers that it does acquire. Woolworths offers a 10% discount on their mobile plan if you are an Everyday Rewards member.
Retail store footprint alone won't be enough to ensure massive customer acquisition. Coles shut the doors on its mobile offerings last year and Woolworths Mobile has been offering a very competitive data allowance for over 12 months combined with a massive retail footprint, but it has not been crazily successful. Aldi can't rely on this if it is hoping to take a large share of the SIM Only market as these 350k subscribers have been acquired directly (online and other direct methods) by most of the providers and without retail footprints as a key growth driver (although amaysim has had a solid retail presence). This means that Aldi will hoping that price sets them apart but they might have to push hard with marketing to ensure that they can keep acquiring customers as the big surges have already spilt (amaysim and Kogan Mobile being the biggest two customer acquisition surges). If Aldi wants quick success, they need to get the market buzzed and ready to surge forward to their offer.
There's definitely a sweet spot with the Aldi Mobile offer and here it is. The two 'As you go' plans are killer offers for kids and seniors due to their long expiry – a whole year. $15 or $30 recharges with as you go rates of 12c per minute and the credit stays active for a year.
The cheaper plans (like new player Yatango which will keep your phone active for six dollars a month) have all been short life span I.e. Relatively short expiry or monthly renewals. The Aldi offer lasts for 365 days. This means if you all you do is receive calls you can keep a phone active for a whole year for $15. If you want to activate emergency phones for kids, that's a great deal. Paying the bare minimum with Yatango will still mean $36/year to keep the mobile active.
Commercially that's an issue for Aldi as the two plans that are the most unique in the market (these 'as you go' plans with 365 long expiry), are potentially very low yielding in terms of revenue for Aldi. They'll be banking on the idea that when people do get these plans they make a lot of calls and starting rack up some decent usage as there's little in it on the current rates.
Retailers in the US have gone down different pathways than Aldi and partnered with cell phone carriers. This lets retailers like Walmart focus on what they do best, sell products, and leave the carrier with the mess afterwards. Walmart has partnered with StraightTalk where Walmart will be getting kick backs from the carrier for each sale so it is profitable from Day 1 for Walmart. Walmart recently offered the iPhone 5 on Straightalk (an MVNO) at a discounted price and it is only available at Walmart store, driving a purchase in a Walmart store and then leaving the carrier with the costs of paying Walmart for use of the massive distribution channel.
If you're after the unlimited plan from Aldi, you'll be rewarded with a comparison before you sign up.