What began as a humble suburban-neighborhood grocery store in Essen, Germany, is today one of the most successful discount supermarket chains in the world. Aldi has been operating with the motto “the best quality at the lowest prices” since Anna Albrecht passed her small grocery store, Albrecht-Diskont, to her sons Theo and Karl just after the end of World War II. Under their direction, the brothers rapidly expanded the business into a chain of stores at multiple locations in the local area, keeping prices extremely low by stocking only non-perishable items and proactively analyzing product sales to stock items that sold well, and removing those that did not. During the early 1950s, the burgeoning chain split into two parts, one for each brother—Albrecth-Diskont Nord and Albrecht-Diskont Süd. The split is thought to be over a dispute over the sale of cigarettes, but despite the split Theo and Karl continued to work together.
In 1954, the brothers opened what would become the template for Aldi’s path to success: Germany’s first self-service store, and in 1962 they shortened the name of the chain to contain just the first two letters of Albrecht and Diskont. More than half a century later, Aldi North and Aldi South have a combined footprint of over 11,000 stores across 19 countries and are serious competition to the more traditional grocery chains such as Tesco or Sainsbury’s. Even Walmart is being given a run for its money ever since Aldi began its aggressive growth strategy in the United States, aiming to have 2,500 stores in the United States by 2022.
So how has Aldi achieved this level of success? Aldi’s simple strategy of keeping costs as low as possible without sacrificing the quality of the products pushed them to maximize efficiency, employ a unique sales strategy, and recognize the importance of good staff.
First, Aldi takes a lean, no-frills approach in how it does business. Above all else, it focuses on being efficient and frugal, doing away with unprofitable features such as 24-hour opening times and stocking a much smaller variety of products compared to its competitors. Instead, Aldi focuses on stocking items that are in demand and sell well, while scaling back or omitting the less-demanded products, keeping waste to a minimum and making sure that every inch of their retail spaces generate revenues. The products themselves are displayed in their shipping crates and packaging id designed to reduce the amount of time, the number of staff members, and, thus, the amount of money required to stock shelves. Experts estimate that Aldi’s operating costs could be as low as half of what the competition faces, but that it also operates at a lower profit margin. On the topic of staff, it is Aldi’s other secret weapon that allows them to undercut the competition. In the United Kingdom, Aldi is known to pay its staff considerably more than other grocery chains. Notably it also employs far fewer staff members and expect employees to be multi taskers, fulfilling a variety of roles thus keeping the headcount low but maximizing the functionality of that headcount.
Simple though they may seem, these strategies have allowed Aldi to go from a small grocery store in Germany to a serious contender to dethrone the likes of Walmart and Tesco on their home turf. The discount grocery chain continues to grow, has no plans on slowing down, and is perhaps more sought after in a post global recession world where customers have developed a taste for their low prices.
DISCUSSION QUESTIONS
9-1. How is Aldi’s business model different from other grocery retailers? Why do you think Aldi’s strategy works?
9-2. Aside from the low headcount, why else might Aldi be paying its staff well?
9-3. Do you think Aldi should stock a greater variety of goods going forward? Explain.
9-4. How would you describe Aldi’s corporate strategy?