Aldi Case

1)What are the core elements to Aldi’s business strategy? Be specific as to what they are doing that sets them apart from competition and WHY this is different than their competitors? The core elements to Aldi’s business strategy are to offer top quality and extremely low prices. One article states that in the Midwest, Aldi’s prices are “15% and 20% less than Wal-Mart and 30% to 40% cheaper than regional chains. ” The company also focuses on selling goods that have a high turnover such as food and beverages. Aldi receives shipments of goods five to six times a week and it takes anywhere from one to four days for delivery.
Aldi’s organized and simple supply chain allows for fast shipment. However, what makes Aldi unique is that while it carries a diverse set of 1,500 products, it does not compare to the number of products sold by Walmart at 125,000. Therefore Aldi offers an enjoyable shopping experience for its customers. Customers do not feel overwhelmed by all of the choices of products like they may do at a Walmart store. A major difference between the two companies is how fast they replenish their products. Walmart uses an extremely complex system that can create lag time in the supply chain.
Also, Aldi strives on promoting its own brand unlike its competitors. 95% of its goods are the Aldi brand. I believe Aldi is different from its competitors because the company is foreign based and that it is a small format. In the New York Times article about why Aldi has succeeded in cities where Walmart has not it says a major reason is because of its small product line. A simple product line has allowed Aldi to be very profitable. Focusing on one genre of products to sell, Aldi can increase the quality of those products. The company does not spread itself out too thin and strives on brining the lowest best quality product to the shelves. )Why have they been so successful over the years? This should be from a consumer perspective. Different from #1 which is from the company perspective. What is the compelling consumer need or perception that they fill in the marketplace. How do they compare to our biggest discounter in food, Walmart? I believe Aldi has become so successful over the years because the company strives on simplicity. Employees of Aldi understand consumer behavior very well. They know consumers are lazy and want to be in and out of stores in the quickest time possible.

Therefore, Aldi management has created a shopping experience meant for the “in and out shopper” which has seen great positive affects. To be the most efficient store, Aldi’s “do not accept checks or credit cards. There is no butcher or bakery, and fruit is sold in bags to speed checkout. ” Compared to Walmart, a store that offers a far less enjoyable consumer experience, Aldi strives to be different. Unlike Aldi’s, Walmart stores can sometimes be intimidating to consumers because of the vast array of product offerings. Consumers find shopping at Walmart to be difficult because there is not a lot of help and that the store is just too large.
Aldi’s on the other hand, creates a much more consumer friendly atmosphere by offering only food and household items. Also when you walk into an Aldi store, you are immediately in a shopping aisle. The store is designed so consumers need to walk through every aisle creating more chances of incidental exposure. Aldi stores are not designed to look pretty. The only purpose they offer to consumers is to help them find products that they need. 3)After visiting our local Aldi’s store, why do you think this global powerhouse may struggle to do well in the US? What was your initial impression of the store?
Who shops there? After visiting the store, I believe this global powerhouse may struggle in the US because the inside of the store is not very conducive to providing a great shopping experience. The aisles are messy and the products look as if they were pulled out from the back of a truck. The store is dimly lit and seems almost dirty. When I walked into the store, I was originally taken back because I had a mindset that it was going to be very nice. However, I was wrong. I did not enjoy my surroundings and I did not believe that Aldi focuses on the high quality portion of their mission, but only the low cost.
Also, the customers that Aldi attracts are lower class individuals. These people shop in bulk and are attracted to the store because of the low prices. They do not care about the sloppiness of the displays just that they can get the lowest price. 4)Knowing what you do about assortment, what part of the ROA equation do you think they maximize? Explain. I believe Aldi maximizes the total assets part of the formula. Because the company strives on stocking it shelves with a limited number of products, their total assets are relatively low. This creates a higher ROA. Aldi has done a very good job at maximizing sales while controlling expenses.
The higher the income and lower the total assets shows how well Aldi is producing earnings from its assets. 5)Now, talk to someone that has shopped at a Trader Joe’s, also owned by Aldi. Why do you think this similar strategy with a completely different execution (in store look and feel) might be more successful here in the US. Look at their US locations for Trader Joe’s. How can they continue to have limited assortment and yet cater to a more affluent target than Aldi’s stores? Based on the article you read, why do you think Trader Joes and Aldi’s are so secretive about their business?
Many US businesses see it as PR if they are covered in the press, these entities feel this is unnecessary. What would you do if the head of marketing for the parent company, adapt to US marketing standards of transparency builds relationships or keep your image hidden and let your products, locations, etc speak for themselves? (Explain your rationale using marketing principles not just your opinion). I believe this similar strategy with a different execution of Trader Joe’s is more successful here because they are more aware of what American consumers want and how they shop.
Trader Joe’s connects with its consumers on a more personal level. Their employees are friendly and their displays are unique, creating an overall enjoyable shopping experience. I think Trader Joe’s is more successful because the company swaps selection for quality. Customers have begun to trust Trader Joe’s in that what ever is on their shelves is the best possible product. Aldi does not have this trust yet. With time, more and more customers will begin to trust the foreign company in that their offerings are of the best quality. Also, I believe Aldi needs to focus ore on creating nicer displays. Currently, these stores are very messy and this could be a reason consumers do not like shopping there. Trader Joe’s can target more affluent people by offering more unique products. Already it offers exotic, affordable luxuries and for it further differentiate itself from Aldi, Trader Joe’s should expand these types of products while cutting back on more common products they sell. Based on the article, I believe Aldi’s and Trader Joe’s are so secretive about how they run their individual businesses because they have been so successful.
I believe they do not want larger stores such as Walmart and Target to figure out their key to success. Because Walmart and Target occupy a large sector of the market and are both extremely powerful, Aldi and Trader Joe’s do not want to be overtaken by them. If I were head of marketing I would continue with keeping the companies image hidden for a period of time. If this tactic was not working, I would soon then adapt to a more transparent company. US consumers like to hear from their favorite companies and they like to feel a connection to the upper levels of management, therefore companies who are more hidden from them may not fare as well.