Aldi 546q5h

ALDI:

A low cost retail giant’s 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 . • 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 )

- Aldi Sud – (South of )

Background • Went international in 1960s. • In 2005, Aldi’s 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 customer’s trust • Set clear goals and follow them rigorously • Improve details daily • Don’t Optimize, Maximize • Know where you stand but don’t waste time on budgets and figures

ALDI way of working • Test NOW, perfect LATER • Be fair and ive to your Suppliers • Management by Trust and Control • Talk in 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 supermarket’s 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 ments 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

distribution

expenses

borne

suppliers itself. • Operating margin- 9.3% (walmart’s- 5.9%)

by

No frills policy • No unnecessary decorations, fancy layouts and product displays • Don’t 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 didn’t 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 while all other retailer’s growth stagnated. • It isn’t 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 it’s 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.