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-to-

seven persons, 700

SKUs

44 Billion USD;Aldi Nord and Aldi

Sud

Product assortment

Items were available in only one standardized

size

Absolutely no frills

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

Simplicity, Frugality, High

Quality and Confidentiality

Aldi

Aldi Nord

Cell………. Cell

Aldi Sud

Cell………. Cell

60 Cells

4000 Store

Aldi- Germany

Aldi Store (~1000 sq. M)

Receiving Docks

Store room (20% of store area)

Selling Area

Distribution Center: 1 per Cell (60 stores on avg. )~25000-40000 sq. M20 reception and shipping docks

Selling Area

Fleet of 25 or more trucks

Branded Products Aldi Products

5% 95%

Frozen Food (5%)

Baked Food (1%)

Dry Goods (81%)

Refri. Goods(10%)

Aldi: Distribution Channel

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

Communicating 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

Value Delivery Chain

• Employees need to memorize bar codes for all products• 4 bar codes on a single product (specified size-supplier’s responsibility)• High Efficiency - 42 items per minute

Decrease check out time

• Truck fork lift system – 3 pallets simultaneously• DC with reloaders – separates 40 large pallets into 80 small pallets every

hour

Distribution Centers

• 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

Supplier Specifications

Time Efficiency

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

increased expenditure”

Product Selection

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

consultingStrategy

• 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

Employees

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

Supplier

• No in store decorations• No security cameras• “One telephone for one store” – communication to

DCs only

Store Operations

• Low inventory - Inventory holding time at DC – less

than 24 hours (cross-loaded into outbound trucks)Distribution

Centers

Cost Saving mechanisms

• Retreaded tyres and wind deflectors for the truck fleetLogistics

• Store locations – low cost districts – 2% of total sales on occupancy cost

• Largest property owner in Germany – very low number of rented stores

Store Locations

• Cash/Debit cards – No credit cards for payments

• Shrinkage: 0.5 % of sales vs. 1.7 % of indus

In direct cost saving

Cost Saving mechanisms

Aldi Vs Competitors

Aldi Walmart

Format Strategy Limited assortment Multiple available

Price StrategyEDLP- 6.6 % lower than

Walmart on AverageEDLP- Costlier than Aldi

Cultural fitness Culturally embodied; Cultural clash and stubborn to

adapt

Product ProcurementEffective procurement

from local suppliersCentralized procurement center;

ineffecient

Legal constraintsModel designed as per

German regulations

Regulations prevented regular Walmart strategy; No big stores;

Price Discount

Aldi Vs Competitors

Aldi Walmart

Stores7200 Stores in 15

Countries5700 Stores in USA

SKUs 700 70,000

Revenue USD 44 Billion USD 285 Billion

Net Income USD 2.1 Billion USD 10.5 Billion

Employees per Store Three-to-seven employees 500 Employees

Percentage of Private Labels

90% 20%

Discount in Price 20 to 30% 12%

Particulars ALDIConventional Supermarkets

No. of Aisles 4 10 to 20

Staff personnel 3-7 30 staff

No. of SKUsAldi North-700Aldi South-900

15,000 or more SKUs

Sales per km 8650 Euros 3960 Euros

Shrinkage Loss 0.5% 1.7%

How Aldi Fared?

Thank You