Melbourne Business School

The University of Melbourne Coles Myer Centre for Retailing and Marketing

Aldi Heading Down Under

Aldi is a German based supermarket chain. Their 1997 turnover was 24.6 billion Euro. They control 4800 stores, of which about 3314 are in Germany. The rest are in Austria, Belgium, Denmark, France, Luxembourg, Netherlands, UK, USA, Ireland, and now Australia. The firm was founded in 1960 by brothers Karl and Theo Albrecht who started in their mother's corner store. They are now the richest men in Europe, valued by Forbes magazine at $13 billion. Aldi is a privately owned and extremely secretive organization. It does not publish its financial results and managers and directors do not grant interviews to the press. Aldi offers customers a trade off. They may not have every product they seek, but they are cheap. However, they may also need to visit a mainstream supermarket to complete their shopping. Customers shopping at Aldi can save up to 50% on their total grocery bills, not just the things they buy from Aldi. Aldi does everything possible in order to reduce costs. For example to use a shopping trolley, you must deposit a coin, which is refunded on return - this means no labour is needed to round up trolleys. Shopping bags are available - but you are charged for them. You can use your own old shopping bag, or use a cardboard carton for free. Bags are not packed and you can only pay by cash or EFTPOS. The range is typically between 500 and 1000 lines, and in most cases it is house brands (a typical mainstream supermarket may have up to 30,000 lines). The limited lines means that two shopping trips may be necessary, one to Aldi and one to a mainstream supermarket for what Aldi do not carry. These house brands look a lot like national brands for instance Manhattan cheese (Philadelphia). The quality without exception is excellent, and superior in many instances to the own label offered by their competition. They stock only one variety, in one size. If you want baked beans, you will only have one choice, in one size. Aldi offers suppliers very long lead times on orders in return for demanding low prices. They ask for no promotional support or discounting as is typical in mainstream grocery. The stores are very bright with an air of efficiency. Product is displayed in its outer packaging, in fact Aldi get suppliers to ship with displayable packaging. Floor stacks are preferred over shelves. Suppliers assist in the preparation and assembly of
This case was prepared for the purposes of class discussion, rather than to illustrate either effective or ineffective handling of a managerial situation. This case was written by Richard Speed at Melbourne Business School using material sourced from the Professional Assignments Group website (www.pag.com.au). Original material 2002 Richard Speed

Distributed by Melbourne Case Study Services at the Melbourne Business School, The University of Melbourne,

pallets of stock that can be wheeled into place. The stores do not have a warehouse as such at the back, stock replenishment occurs from the distribution centre automatically. Stores have unlisted phone numbers - so staff never have to answer the phone. They are vulnerable to customer theft due to the very low staff presence. However the store layout is designed to minimize this. Vulnerable items are visible from the checkout area. You can't leave the store via the entrance - there is an 'airlock' style corridor with automatic doors at either end that only open from the entry side. Likewise to leave the store you must queue through one of the long, narrow checkouts. There is often only three staff in a 600 sqm store. All the staff is multi-skilled. The cashiers also bring out pallets, and machine clean the floors at the end of the day. The store manager and his deputy do likewise, as well as receiving deliveries and cash office procedures. Shop staffs wages are more than twice the National Minimum Wage in the UK and store Management salaries are exceptionally high. Staff turnover seems very low and obviously a loyal, motivated workforce is a blessing. Aldi do not trade late nights, Sundays or Bank Holidays, thus they avoid paying penalty rates of pay. Their stock service levels are very high - far better than Australian chains. They can tend to run out of stock towards the end of a busy trading day on popular perishable lines, but are back in stock next morning. It is very much part of making shopping hassle free - Aldi shoppers tell of getting round the shop very fast, and getting out fast. What you want is in stock, and you know where it is, and you don't have to look at dozens of special tickets to decide what brand to buy. And check-outs are much faster with cash only.