Aldi: The Dark Horse Discounter in the Grocery Industry

Executive Summary

Aldi’s plan to accelerate stores expansion in the U. S. by 2018. The problem is Aldi’s has to face intense competition from Wal-Mart. Even though Aldi’s has competitive advantages of high product differentiation, affordable price, good quality of food than Wal-Mart, Aldi’s lack of advertising their brand recognition. In other words, Wal-Mart has a strong retail presence in the U. S. market than Aldi’s. In order to help Aldi’s reach the goal, there are two strategies:

• enhance brand recognition at a national level through social media.
• avoid open new stores close to Wal-Mart.

Option 1 would be helpful because it could attract more customers to recognize their brand and increase demand of customers their needs from Aldi’s. Option 2, it might be difficult to find a location where has no Wal-Mart.

Case Overview

Aldi’s, a small grocery store, is established initially in German and has expanded the market to the United States (U. S. ) in 1976. It has its features of offering low price and stresses on private label for products. Also, Aldi’s is offering a limited selection for each product in order to ease customer hesitant of choosing products. Moreover, the company has equipped with own unique operating model to make competitors challenging to compete with their price and quality. The company goal is to expand 50% of stores which is approximately 2, 000 stores in the United States (U. S. ) by 2018, and the objective is store expansion in the U. S. However, the main problem is Aldi’s lack of marketing to make itself noticeable as it entered into the U. S. market. Aldi’s remains unknown nearly 40 years. Compared with other larger stores, such as Wal-Mart and Costco, both of them have a strong market presence in the U. S. market for years. Therefore, the challenge is how Aldi’s would make themselves to more marketable to compete with other large stores like Wal-Mart in the U. S. market.

Analysis

Aldi’s has been able to expand their stores to 17 countries due to its potential operation business strategy. Their operating model follows three main components: low prices, simplicity, and effective operation. While these three factors seem easy to duplicated by other competitors, Aldi’s deploys three competitive advantages to compete with other competitors and continue their business growth in the U. S. market. Even though Aldi’s has the potential to keep opening stores in the U. S. , Aldi’s has to face competition among other large stores their competitive advantages. Wal-Mart, one of the largest retailer companies in the U. S. , is the main competitor to Aldi’s.

While both of them are famous for a low-price strategy to attract customers, Aldi’s product prices were much lower 30%-40% than Wal-Mart in regional chain stores. The potential worry that Aldi’s private suppliers might mostly come from Europe because Aldi’s sells private label products from European. The cost for the transportation from Europe to the U. S. would be expensive. If Aldi’s wanted to succeed in expanding more stores in the U. S. , Aldi’s would like to seek the U. S. suppliers to produce their private label products. To Wal-Mart, it has large U. S. suppliers provide them with a large variety of brand products which are selling at a low price. Hence, Aldi’s would have to face looking for new suppliers in the U. S.

Moreover, Wal-Mart can perform several store structures. In comparison with Wal-Mart, Aldi’s provides one store structure which mainly the limitation of household items and groceries. It is in favor for customers to ease the selection of choosing items and also accelerate shopping trips. However, Wal-Mart has provided other three store structures, such as Supercenters, Neighborhood, and Walmart Express. They provide a wide variety of products, offering full supermarket and pharmacies, and locating in both urban and rural areas. Thus, Wal-Mart has more options to meet customer needs. Finally, Aldi’s has weak brand recognition than Wal-Mart. Due to Aldi’s limited spending money on advertising, Aldi’s still remains unknown for over four decades. Conversely, Wal-Mart has a strong brand recognition across the U. S. The difference between these two companies is Wal-Mart has a competitive advantage of brand marketing, which Aldi’s does not. Therefore, Aldi’s would need to invest some guaranteed money in branding themselves to make them easily recognized by customers.

Options

Aldi’s goal is to expand approximately 2, 000 stores by 2018 in the U. S. In order to reach the goal, Aldi’s has to encounter competition from Wal-Mart. Because Wal-Mart is a well-established store across the U. S. and has already established its brand image and customer base. There will be two options in the following paragraphs that show how to improve Aldi’s competitiveness in their store expansion plan.

Option 1: Aldi’s should enhance brand recognition at a national level. In order to help Aldi’s to become a famous grocery store across the U. S. , Aldi’s could spend some capital on advertisement through social media. Social media, such as TV, YouTube, or Instagram. It would be able to catch more consumers attention, and social media could help the customer leave an impression on their mind. On the other hand, Aldi’s would need to consider how much budget they would like to spend on their brand advertising. Hence, increasing their exposure on social media is one of the fastest ways to make people know them. At the same time, Aldi’s would like to calculate how much money they are willing to spend and to make the advertisement worthwhile.

Option 2: Aldi’s should open their new stores' location through careful consideration rather than randomly choosing them. Wal-Mart has been opening many stores in multiple locations in the U. S. Aldi’s should consider which locations or regions that Wal-Mart has fewer in that area. Even though open new stores in a place which has the least competition, consumers might have already get used to Wal-Mart their brand variety products or services. As a result, Aldi’s would like to do location analysis to see the scale of competition in that place.

Recommendations and Conclusion

In a nutshell, Option 1, marketing strategy, would be a good recommend option to face the competition challenge by Wal-Mart. Since Aldi’s has been unknown for many years, it would be an excellent opportunity to help Aldi’s attract more customers who do not know Aldi’s before. The more people that recognize them, Aldi’s will have an increased likelihood that they have successfully established their brand reputation across the U. S. Aldi’s should utilize marketing strategy to make their competitive advantages such as national private brand products, good quality of food, low price, efficient operation, location stores in Europe countries, etc. to introduce more people knowing their advantages. Consequently, Aldi’s would be able to successfully expand stores and run store sustainability if they could improve their competitive disadvantages to competitive advantages.