Analysis Of The Business Strategy Of Aldi Grocery Store

ALDI was founded by a set of German brothers, the Albrecht family. Germany was the home of the first ALDI store in 1961. Even though the store chain was founded in Germany, the corporation’s headquarters is in Batavia, Illinois. The chain began popping up in the US in 1976, with the first store located in Iowa. Since the opening of the first ALDI store in the United States, the chain has grown an extreme amount. There are now 1,600 stores in the United States which has created jobs for 25,000 people. By 2018 the store ended up doubling. The exponentially growing company is expected to be the third largest grocery store within the next couple of years, closing in on Walmart and Kroger very quickly.

Starting in the beginning of the 1990s, ALDI entered into the UK market. ALDI was able to break into the market due to the low prices that are offered for quality food products. However, they did come across a couple of barriers when entering this market. The UK market created a large amount of competition for this discount retailer. One of the biggest competitors was LIDL. LIDL was also a discount retailer, however, there were some slight differences between the two. ALDI offers fewer options of products for customers to choose from. Due to this, ALDI is able to offer lower prices, which attracts more customers into the store. Also, ALDI is targeting the target market more. LIDL has an option for online shopping, but with the target markets being low income families, most will not have very much internet access. ALDI was able to pull ahead in market share against LIDL in the UK. This company ended up with a whopping 3.1% of market share. ALDI offers its own labels on products which allows it to excel. LIDL had fallen behind ALDI in the early 2000’s.

ALDI’s business strategy makes certain that all costs are kept to a minimum. This is how they are able to attract their target market. They can do this by purchasing large quantities of small range goods. Most of the stock that ALDI puts on its shelves is labeled with the company’s own specific labels (ALDI). ALDI tries to push the fact not only of the prices being low, but that the quality of their products offered is exceptional.

ALDI experienced some external environmental factors along the way. First, ALDI has not adopted very much technology that many other grocers have been using for quite some time. For example, many other grocers offer a self-checkout. This allows the customer to check themselves out without having to wait for an employee to do it. However, ALDI has not yet adopted this. This is a threat to ALDI because it could deter some customers away who are waiting in long lines to only purchase a few items. With many people shopping at ALDI having large orders, it does take longer to get through the checkout lines.

There was also an unfortunate legal factor that came into play in 2016. Someone had reported that ALDI was misrepresenting its produce and herbs. They had found some olive leaves in the oregano products. This could cause a lot of trouble for a company that values the quality of the food that they are selling. This lowers the reputation and dependability of ALDI in the eyes of customers. When situations like this happen, it can cause a setback in the success of the company.

There are a few ways that ALDI succeeds in the market and can come out on top. First off, they employ a fewer number of employees than most other grocery stores. There are only a few employees; a few cashiers and someone to operate a forklift to move the pallets of product. They can save headcount because they do not have to hire baggers, since the customers bag their own groceries. When items are scanned at the checkout, they are put directly into a shopping cart which the customers can then take to a side counter to bag them themselves. On top of that, in more recent years, ALDI has been updating their stores from plain, gloomy stores, to more attractive storefronts. The company is adding wider aisles, different lighting, and larger displays of product. The company’s formula, plus a lower headcount, as well as an updated view on their stores has allowed ALDI to come out on top.

References

1. ALDI. (n.d.). ALDI History. Retrieved from https://corporate.aldi.us/en/aldi-history/
2. Business Teacher. Aldi PESTEL Anaysis. Retrieved from https://businessteacher.org.uk/pestel/aldi.php
3. Gill, S. (2013, March 4). The international strategy of Aldi based on the UK market. Retrieved from https://www.ivoryresearch.com/writers/susan-gill-ivory-research-writer/
4. Williams, A. (2018, November 29). From the magazine: The unstoppable rise of Aldi and Lidl. Retrieved from https://www.handelsblatt.com/today/from-the-magazine-the-unstoppable-rise-of-aldi-and-lidl/23572396.html?ticket=ST-2718962-bGsCibAhVhyOPHhKedHY-ap5