Aldi-A German Retailing Icon

Ananth G (1111008) Divya RM (1111026) Naveen R (1111042) Parasuraman A (1111047) Sagar Behera (1111058)

Aldi- Albrecht Discount Stores

Focus on the indispensable and avoid the unnecessary 4 aisles, three-toseven persons, 700 SKUs 44 Billion USD; Aldi Nord and Aldi Sud Simplicity, Frugality, High Quality and Confidentiality Items were available in only one standardized size

Product assortment

Absolutely no frills

No complicated methods to set price; No complicated engineering for logistics No customer survey; No product placement

Aldi- Germany
Aldi Aldi Nord Cell. Cell Cell.

Aldi Sud

Cell

60 Cells

4000 Store

Aldi: Distribution Channel

5%
Branded Products

95%
Aldi Products

Frozen Food (5%)

Distribution Center: 1 per Cell (60 stores on avg. ) ~25000-40000 sq. M 20 reception and shipping docks
Dry Goods (81%)

Baked Food (1%)

Fleet of 25 or more trucks

Refri. Goods (10%)

Receiving Docks Store room (20% of store area) Selling Area Selling Area Aldi Store (~1000 sq. M)

Value Delivery Chain

Creating Value
Quality Testing Legal Requirements in Germany Intense laboratory tests on eggs Tasting awards for beers No frill efficient Operations leading to cost savings

Delivering Value
No question returns policy Faster checkout rate 42 items per min Store Locations Average cost of SKU 1.47 euro Lowest price Area specific products

Communicatin g Value
Brand Image of EDLP In store advertising with fliers Out-of store advertising for new locations only Surprise Buys

Capturing Value
High Quality Private labels at very low cost Loyal customer Base ALDI themed parties Simplified Decision Making

Time Efficiency
Decrease check out time Employees need to memorize bar codes for all products 4 bar codes on a single product (specified size-suppliers responsibility) High Efficiency - 42 items per minute Distribution Centers Truck fork lift system 3 pallets simultaneously DC with reloaders separates 40 large pallets into 80 small pallets every hour Supplier Specifications Supplier ships products in open boxes- goods in a single pallet prepared for sale within 3 minutes Stringent box dimension requirements on suppliers-placed in refrigerator without unpacking

Cost Saving mechanisms

Product Selection Strategy

Aldi dictates prices for all SKUs SKU count-700; every additional item certainly causes increased expenditure

Very low advertisement and marketing expenditures No marketing/strategy departments; management consulting

Employees

Lesser employees (3-7 employees per store) More pay Personnel costs: 3% of sales vs. 9% indus. avg. Employees trained to eliminate wastes No separate employees for unloading

Cost Saving mechanisms

Entered into long-term pricing agreements with Suppliers In bound logistics on freight paid basis from the supplier Punctual payments Opportunity for better margins No in store decorations No security cameras One telephone for one store communication to DCs only

Supplier Store Operations Distribution Centers

Low inventory - Inventory holding time at DC less than 24 hours (cross-loaded into outbound trucks)

Cost Saving mechanisms

Logistics Store Locations In direct cost saving

Retreaded tyres and wind deflectors for the truck fleet

Store locations low cost districts 2% of total sales on occupancy cost Largest property owner in Germany very low number of rented stores

Cash/Debit cards No credit cards for payments Shrinkage: 0.5 % of sales vs. 1.7 % of indus

Aldi Vs Competitors
Aldi Format Strategy Price Strategy Limited assortment EDLP- 6.6 % lower than Walmart on Average Culturally embodied; Effective procurement from local suppliers Walmart Multiple available EDLP- Costlier than Aldi Cultural clash and stubborn to adapt Centralized procurement center; ineffecient

Cultural fitness

Product Procurement

Legal constraints

Model designed as per German regulations

Regulations prevented regular Walmart strategy; No big stores; Price Discount

Aldi Vs Competitors
Aldi Stores 7200 Stores in 15 Countries Walmart 5700 Stores in USA

SKUs
Revenue Net Income

700
USD 44 Billion USD 2.1 Billion

70,000
USD 285 Billion USD 10.5 Billion

Employees per Store

Percentage of Private Labels Discount in Price

Three-to-seven employees

500 Employees

90% 20 to 30%

20% 12%

How Aldi Fared?

Conventional Supermarkets 10 to 20 30 staff

Particulars
No. of Aisles Staff personnel

ALDI
4 3-7

No. of SKUs
Sales per km Shrinkage Loss

Aldi North-700 Aldi South-900

8650 Euros 0.5%

15,000 or more SKUs

3960 Euros 1.7%

Thank You