ALDI:

A low cost retail giants Distinctive Business Practice

Presented By:Pooja Kapoor Ankit Kapoor Richa Kaurani Aditee Goyal Abhinav Tyagi Rajesh Singh

Background
Set up by Karl and Theo Albrecht after second world war by
the name of Albrecht Discount Company in Germany. Concentrated only on LOW PRICE policy. In 1961, opened ALDI supermarket in Dortmund city In 1961, Karl and Theo separated and formed separate business units:- Aldi Nord (North of Germany)

- Aldi Sud (South of Germany)

Background
Went international in 1960s. In 2005, Aldis estimated sales was around $45 Billion. It is enjoying 40% market share in German grocery retail market.

Forced WAL-MART to exit from German Market.

ALDI way of working

Company motto:- Top quality at Incredibly Low PriceGuaranteed

Carry limited and uniform range of products

Offer NO services like Bagging, Wheel Cart Management etc.

ALDI way of working

Secret of SUCCESS. Keep it simple Earn customers trust Set clear goals and follow them rigorously Improve details daily Dont Optimize, Maximize Know where you stand but dont waste time on budgets and figures

ALDI way of working

Test NOW, perfect LATER Be fair and supportive to your Suppliers Management by Trust and Control Talk in terms that People can understand No matter how successful you are, stay on the ground

Product Strategy
Carry Limited Variety of fast moving products Store only around 700 different products as compared to around 1,50,000 by a WALMART superstore. This Limit gave Aldi better control over Quality and Price. To ensure low price, it adopted Tender policy Provide items that are easy to handle and store. Avoided

fast spoiling and deep refrigeration needed items.

Product Strategy
90% items are private labels, only 10% regular brand.

No compromise on quality.
No fancy packaging. Maximum two brands for each product. Limited products resulted in high stock turnover. Refund + free replacement guarantee on quality Weekly special sales of items generally not available there.

Small Stores
Small Store Area of around 15,000 square feet.

Stores located at shopping centers and other retail properties,

so No standalone stores Earning per square meter 8,650 Euros as compared to tradition supermarkets average of 4,000 Euros Low staff level

Promotions and Operations

No Advertising Policy: Only communication was a weekly newsletter Aldi Informiert. It believed Low prices were advertisements enough But in overseas market, it changed the AD strategy In US, UK and Australia- Ads in magazines, newspapers, television channels.

Promotions and Operations

Simplified Operations: Minimum no. of people- minimum wage bill On an average only 3 people- store manager and 2 assistants Employees were expected to be multi tasking Open for limited hours only (9 a.m. to 7 p.m.) and are closed on holidays and sundays, so no overtime payment Bagging has to be done by customer only.

Promotions and Operations

Simplified Operations: For long time accepted CASH only. Now also accept debit and credit cards. Simplified and clear organisation structure on region basis: each region has 50-80 stores and is under a managing Director. Efficient centers, logistic system: regional logistic expenses borne by

distribution

suppliers itself. Operating margin- 9.3% (walmarts- 5.9%)

No frills policy
No unnecessary decorations, fancy layouts and product displays Dont provide grocery bags, customer have to buy it also. Locked shopping carts, only available by inserting coin. No helplines, customer have to meet the manager on person. This No frill policy became a strength of this retail store as people are willing to forego some luxury for lower price. But in international arena, this policy should be country specific as every country has its own culture and priorities.. E.g. people in Ireland didnt like this No frill policy.

Threat from LIDL

LIDL is a part of German holding company Schwarz.

Set up discount stores on the ALDI concept

In 2004. sales were $49.1 billion Emerged as Strong competitor of ALDI

Posted a growth rate of 13% in Germany while all other

retailers growth stagnated. It isnt a No Frill store, rather it is a Low frill Store providing some sort of free customer service.

Where LIDL has an EDGE

LIDL positioned itself as a discounter that care about

customer satisfaction.
Carry large no. of products. (around 1200 as compared to 700 of Aldi)

No rigidity on having private labels only

Open for longer hours and on holidays Entered those markets where Aldi have NO or Limited presence.

German Saturation
German retail market has become saturated. More than 80% Germans live within 20 minutes of an ALDI store. No new target customers Lidl might overtake Aldi in Europe by 2012.

What to do . . .
As German market is saturating, its wise to go International. Aldi has presence in US, UK, many European countries and Australia. But Huge Asian market and futuristic African market is still not covered up. Aldi have to change its strategy for international competition.

What to do . . .
It should learn from the Ireland mistake and try to build strategy on country specific basis. Markets such as INDIA like complete shopping experience kind of stores.

It should extend the opening hours to late evening and also

should consider to open the stores on Sundays and holidays as these are the major shopping days. It should consider to extend the product range offerings.