ALDI is a global chain of no-frills supermarkets offering a limited assortment of groceries for the best prices in town. Brothers Theo and Karl Albrecht opened their first food store in 1948 in the Ruhr Valley, Germany. They honed their unique approach to retailing over the years to become one of the world’s biggest grocery chains with reported annual sales of E 29 billion (US$ 27B).
Based in Essen, Germany, the privately-held ALDI Group today operates around 4,400 supermarkets under the ALDI banner (the name is short for “Albrecht Discounts”). About 3,000 stores are in Germany, but the chain has stores in nine other countries and is now spreading throughout Western Europe, Australia and the US.
ALDI proclaims its brand promise on its website in Australia: “Top quality at incredibly low prices – guaranteed. That’s the ALDI promise.”
When ALDI opened a store in Raleigh, North Carolina, earlier this year, the local newspaper quoted shoppers who were ecstatic about the bargains – a 15-ounce can of peas for 29 cents, a loaf of bread for 39 cents, and a 48-pack of medium diapers for US$ 6.99.
“What makes retailers successful is having a clear definition of what their message is to consumers. There’s definitely no question about ALDI’s message: low prices and limited selection,” said Russ Jones, a vice president with Cap Gemini Ernst & Young, an international retail consultancy based in Paris.
Most supermarkets have about 25,000 products for sale in a dazzling array of sizes and flavors. ALDI stocks 700 to 1,000 of the most often used items for the average household, and there is only one brand in one size for each product category. Only 15 percent of the goods are national brands. The rest is private label products sold under a variety of exclusive names: Millville (breakfast cereal), Casa Mamita (refrigerated tortillas and salsa), Snack Rite (crackers), among many others.
“The ‘name brands’ are only in the store when they can get a deal from a national manufacturer that fits within their super-low price image. But [private label brands] are not going to be worse quality than national brands. You will get the same quality,” said Jones, who works in the consultancy’s Richmond, Virginia, office.
In fact, many of the private label products are made by well-known brand manufacturers and shipped in different packaging. ALDI still makes a profit on the low-cost sale because it buys in large quantities.
Surprisingly, the stores also sell some textiles, electronic equipment, garden supplies and housewares. Although ALDI sells pre-packaged meats and baked goods, its stores don’t have fresh meats and fish or bakeries. So, customers usually supplement their purchases by shopping in a traditional supermarket.
There’s nothing traditional about the shopping at an ALDI, which typically measures 15,000 sq.ft. (1,394 sq meters), or about a third the size of the average supermarket. Products are not stocked on shelves. Rather, they are merchandised in their original shipping cartons with the lids cut off and placed on a row of wooden pallets on either side of an aisle. The idea is to save on labor to stock shelves.
Costs are minimized in other ways, too. Shoppers have to bring their own shopping bags to the store. Otherwise, they can buy a paper sack for five cents, or a plastic one for ten. Shoppers can “rent” a grocery cart for a quarter, but they get their money back by returning the cart. This does away with having clerks round up carts all over the parking lot.
Not that there are a lot of clerks to begin with. ALDI employs fewer workers than comparable supermarkets partly because it’s closed at night, on Sundays and for all major holidays. There are only a few cashiers per store. Why is there so few staff? According to the FAQ section of ALDI’s website in the UK: “Our stores employ the Fastest Friendliest People in Retail.”
Perhaps. But this Spartan business model – cost control, low prices, and limited selection of quality products – has definitely translated into success in every country ALDI enters. It’s a format that appeals to budget-minded shoppers, as well as those on a low- or fixed-income, according to Jones.
“There are people who say there is no room to compete with Wal-Mart on price, but ALDI has figured out a way to do it,” he said.
In the international world of food retailing, ALDI has become a supermarket brand to be reckoned with. The retailer opened its first store in Australia in 1990 and plans to build 100 more in the next few years. It has a foothold in Spain and Ireland. In part of the US, there are 615 ALDI supermarkets, stretching from the East Coast to Kansas, but none west of there. At least, not yet.