Does discount work for high-density locations?

The discount model has evolved significantly over the last two decades or so, bringing with it new store models and concepts better suited to the needs of a high traffic location, servicing a convenience mission. Retailers have adapted by introducing self-checkouts, expanded food-to-go ranges, and extended opening hours. But does the model truly work? 

Firstly, as with all things in retail, this depends greatly on the market in question. Shoppers behaviours are incredibly different across the globe, and while the little and often shop has been favoured over the big weekly shop in many parts of the world in recent times, there are places where an established and beloved convenience store network presents hurdles. 

Not every market is suited to urban discount 

Take the case of Switzerland: the two largest retailers, Coop and Migros, both have dedicated to food-to-go formats located in very high footfall areas such as city centres and transport hubs. While value is not the key part of the offering, the breadth and ease of mission completion are key drivers of footfall and success. Aldi, with a significantly smaller market share, announced plans to open a store in Basel train station, which never came to fruition. It has also been closing select locations in very high-density areas, keeping its stores on the residential outskirts of cities.  

The challenge for discount retailers is that urban locations demand convenience missions, compact stores and local relevance, rather than the traditional weekly-shop model. 

City centres and transport hubs are the next growth frontier 

In Poland, Aldi Nord opened its first railway station store at Warsaw Zachodnia station, one of the country’s busiest transport hubs. The store uses the compact ALDI Compact 2.0 format, designed for high-density, high-footfall urban locations and serves both commuters and local residents. 

In the US, Aldi has reached the heart of Manhattan, opening a store in Time Square. The opening is part of a massive expansion which has seen the discounter open over 100 stores each year, with plans to continue in the medium term; high-density locations are a key target for this. 

The Midtown store showcases Aldi’s new global store design concept while bringing much-needed affordable groceries to one of the world’s most expensive neighbourhoods. The brighter, more contemporary environment with wider aisles provides a more pleasant shopping experience, and convenience ranges feature first-in-flow to make it easy to shop for tourists and commuters. The store will also likely be heavily used by quick-commerce operators for added convenience. 

Tourism and localisation create new opportunities 

Beyond commuters and residents, tourism is creating another opportunity for urban discount retailers. In Asia, Japan’s Don Don Donki targets tourists with its stores in big urban environments, transforming the experience into a joyful treasure hunt for souvenirs to take home. Aldi Nord does similarly in Berlin, with a themed “checkpoint Charlie” store, featuring a bespoke theme and souvenirs that tourist can enjoy. 

Germany’s discounter Penny also features several themed stores across the country, bringing an extra level of engagement and excitement. In its latest opening, it has partnered with a local reality TV star to create a store inspired by her look and personality in a bid to resonate with younger shoppers. Other store themes include Berlin’s U-Bahn, graffiti inspired by the Berlin wall, and a retro-arcade in Hamburg.

Critically, a key element of the stores is that the assortment and value offering are the same as other Penny stores, leaving its core offering unchanged. 

The operational realities of urban discount 

Discounters face a fundamental challenge in that their traditional model is built around large stores, standardised assortments and weekly grocery shops, while city-centre, station and tourist locations typically generate smaller, convenience-led shopping missions. 

A key risk is assortment relevance. Commuters and tourists often want grab-and-go food, drinks, travel essentials and ready-to-eat meals, whereas many discounters continue to prioritise their normal grocery range rather than tailoring ranges to these missions. 

These locations also come with higher rents, tighter footprints and more difficult logistics, forcing retailers to adopt compact layouts, multi-level formats and more frequent replenishment. In some cases, higher labour costs may also be a factor. 

The most successful urban discounter formats will be those that can balance two missions simultaneously, serving local residents completing a full grocery shop while also meeting the convenience needs of commuters, workers and visitors. 

What this means for suppliers 

For suppliers, urban and transport-hub discounter formats offer access to higher-frequency shoppers and new consumption occasions. There are particularly opportunities in food-to-go, ready meals, snacks, drinks, smaller pack sizes and locally relevant products that are not typically the focus of traditional discount stores. 

Discount can work in high-density locations, but only when the format evolves beyond a traditional discount model through convenience-led ranges, mission-based merchandising and compact store formats.