When the owners of premier food chain in Germany decided to expand in US, they did something brilliant. They started a whole new company that is at the bottom of the market and has a tremendous opportunity for growth. Aldi’s thought through every aspect of store operation and by single minded focus on reducing costs and increasing troughput (volume) developed a store that changed the way first the inner city dwellers and then suburbanites shopped. By developing a strong supply chain, a private brand and the market appeal Aldi’s chose to thrive in the markets that others have written off as unprofitable. Not accepting credit cards, not having shelves or stocking personnel, hiring the cashiers for speed, setting up the layout to force a quick flow, yet insuring that people buy all the unhealthy foods (high mark up) before they get to the healthier food section, self return cart system, charging for bags, etc. are just some of the approaches in which Aldi’s stays cheap.
In their brilliance, they designed their stores in a such a way that they would not fit in to traditional categories and would therefore be largely ignored by their direct competitors. Caring just enough merchandise to not be considered a grocery store, Aldi’s has managed to eat in to revenues of the grocery stores and even almighty Walmart SuperCenters.
Aldi’s has managed to move up market ever so slowly, which has allowed them to develop one of the best supply chains in the industry, without anyone giving them a second look.
While I think their canned food could be less salty and their sweets less sugary. They get an A+ for their business strategy, if not for contributing to our nation’s obesity.
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