German discount supermarket chain Aldi will open two pilot stores in China next Friday, reflecting the retailer’s first physical presence in the world’s second-largest economy. The stores, set to open on June 7, will be in the Jing’an and Minhang districts of Shanghai, making China the 11th country the retailer operates in. The privately-owned supermarket chain has been selling goods online in China since 2017 via Alibaba’s online retail platform Tmall, and last year launched an online flagship store on the site. Alibaba is the owner the South China Morning Post . According to retail research firm IDG Asia, Aldi will continue to use online trading to understand local Chinese consumers and test products before launching them in physical stores. “Our first stores in China needed to be an offering that fits in with Chinese consumers’ behaviour,” Aldi China said in an email . “We also wanted our first stores to be pilot stores - for us to trial and test retail approaches, for us to better understand our customers.” Aldi will also launch a a programme on Chinese messaging app WeChat, offering products with instant delivery within three kilometres of each store, the company told the Post . Aldi plans to open 50 to 100 physical stores in China in the medium term , and a central warehouse in China, according to IDG. “Aldi has always been committed to a long-term presence in China, and we want to ensure that we are pacing our development in China appropriately,” said Aldi. The company said its target audience was Chinese consumers looking for high quality, imported products at good value. The company runs 10,000 stores worldwide, according to its website. Up to 200 employees currently work for Aldi China, which counts Shanghai as its headquarters, according to the company’s LinkedIn page. Discount supermarkets pioneer Karl Albrecht, co-founder of Aldi chain, dies The move comes at a time of expansion for the chain. Last year Aldi opened its first shop in Italy. The supermarket chain plans to add 20 to 30 stores a year in Australia, and is pushing to become the third-largest grocery retailer in the US. “Aldi currently operates stores in Europe, Australia and North America. Trading in Asia, and particularly China, will be very different,” said Nick Miles, head of Asia-Pacific at IDG, in a research note. “Many international retailers have entered this market over the past 20 years and not succeeded, while discount is a grocery channel that doesn’t currently exist in China – or Asia – in any meaningful way.” In April 2018, Spanish supermarket chain Dia sold hundreds of mainland stores to a unit of Chinese retail giant Suning Group, after entering the market in 2003. The previous year it had lost 26.68 million euros (US$29.70 million) in its Chinese operations, according to a report by Spanish newspaper El Economista at the time. To survive, Aldi must adapt to China’s unique market, where discount stores are not common and smart supermarkets are booming. “China is an incredibly dynamic country, with varying consumer preferences and differences to navigate. Brands are king in China, while Aldi relies heavily on its private label ranges,” said Miles. “Meanwhile, online grocery retailing and digital technology in retail is exploding in the market, while Aldi operates through physical stores and its model is based on retail efficiencies.” According to Aldi China, “exclusive brands combined with our operational efficiency is Aldi’s strongest differentiator around the world.” Alibaba says New Retail strategy is paying off as Hema shopper data shows bigger average spending Despite a slowing economy, China is set to overtake the US as the world’s top retail market for the first time, according to eMarketer. The research firm forecast retail spending on the mainland to grow 7.5 per cent this year to US$5.6 trillion, which would be about US$100 billion more than in the US. By 2023, the mainland will have also overtake the US to become the world’s largest grocery market, according to IDG. The group forecast growth of 30 per cent in China’s grocery market from 2018 to 2023, to reach an annual value of US$1.8 trillion.