Strategy Development Process in Aldi Supermarket

Strategy Development Process in Aldi Supermarket

 

Albrecht Discount, or Aldi for short, is a Germany-based discount supermarket chain

that is made up of two distinct groups originally owned and managed by the brothers

Karl Albrecht and Theo Albrecht. Aldi North and Aldi South are separate operators

within specific market boundaries, with the former having 35 individual companies

comprised of 2,500 stores in western, northern and eastern Germany, and the latter

having 31 regional companies comprised of 1,600 stores in western and southern

Germany. Aldi North also operates in Denmark, France, the Benelux countries, the

Iberian Peninsula and Poland, while Aldi South likewise operates in such countries

as the U.S., Ireland, the U.K., Hungary and Switzerland. Based on market research

in 2002, 95% of blue-collar workers, 88% of white-collar workers, 84% of public

servants and 80% of the self-employed in Germany all patronize Aldi stores.[1]

 

The business practices of Aldi found to be unique in its international locations include

the system of metal gates and turnstiles that force customers to a checkout exit, the

charging for shopping bags, and its acceptance of only cash payments until recently.

Credit cards are generally not accepted at Aldi, which also requires a coin-token system

for the use and return of shopping trolleys by customers. Aldi offers inexpensive

household staple items such as food, beverages and sanitary articles, carries many

products with its own brand label and limits the presence of other brands to no more

than two per product category. This increases product sales, allows for smaller Aldi

stores and avoids the use of price tags. Aldi retails the largest volume of wine in

Germany, holds weekly special offers and also occasionally offers reduced prices of

major brand-name products purchased from vendors at special prices.[2]

Aldi has a simple and economical approach to retail in that it avoids decoration along

aisles and shelves, allows for easy pick up of products by customers and employs

minimal staff and an efficient check-out system. Aldi issues a weekly newsletter of

special prices that saves on advertising costs that it claims it passes on to consumers.

Aldi’s reputation of selling cheap low-quality goods in some quarters has not dented its

profits and its issuance of cookbooks using only Aldi ingredients has boosted its public

standing. On the other hand, Aldi has faced issues on workers’ discrimination in the

U.K ., unfair labor practices in the U.S. and non-compliance on sourcing requirements

of sold furniture in Germany.[3]

 

Aldi’s fundamental strategy is to offer the lowest feasible prices on a limited number of

of 900 high quality staple food items because of its belief in the inseparability of limited

assortment and low price and on the soundness of disregarding the extras and focusing

on what is necessary. Its retail principles also include the need to earn customers’ trust,

to set and rigidly follow clear goals, to test now and just perfect later through constant

improvements, to maximize and not optimize, and to stay thrifty and frugal through it

all.[4]

 

Aldi stores measure approximately 1,000 square meters and are staffed by an average

of three people who are all busy at work, but earn twice as much than other

supermarket workers, but with its personnel costs being 3% of sales as compared to the

9% of other supermarkets. The 50 to 80 stores within each Aldi cell structure, permits

the company to not publish financial results and enables the distribution center of each

cell to supply all stores within a 50-kilometer radius. Aldi has a high purchasing power,

with each buyer being in charge of 100 items worth 2 billion euros annually. It has an

estimated per square meter sales of 8,650 euros as compared to the just under 4,000

euros sales of traditional supermarkets. Aldi North and Aldi South register combined

sales of 37 billion euros from its 7,200 locations across 15 countries, with annual net

profits being seen to be between 1.1 and 1.3 billion euros.[5]

 

[1] “Aldi”, Wikipedia, 24 May 2011, <http://en.wikipedia.org/wiki/Aldi>  [accessed 6 June 2011]

[2] ibid

[3] ibid

[4] Marc Sachon & Jordan Mitchell, “Aldi: A Supermarket with a Reason to Celebrate”, BetterManagement.com, 2009, <http://www.bettermanagement.com/library/library.aspx?l=14226>

[accessed 6 June 2011]

[5] ibid

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