You might not have shopped in an Aldi grocery store, but you’ve probably heard of them. Aldi, a German retailer, is the fastest growing grocer in the United States when measured by store count. Why is Aldi popular? Well, it’s one of the cheapest places to buy groceries right now. Prices on basics like bread, eggs, and milk are consistently lower than at competitor locations. How does Aldi do it? It all comes down to operational efficiency. Starting with its store location, Aldi keeps operational efficiency in mind. So, Aldi stores are much smaller than competitor locations allowing the company to save on lease and utility costs, and at the same time, reduce the number of steps and distances employees must cover while at work.
If you’ve been in an Aldi you’ll know that Aldi’s focus on efficiency carries through to its product display and even the number of products it carries. Rather than expend effort on unpacking and shelving items, for example, Aldi often leaves them in their shipping containers for customers to unpack on their own. The grocer also doesn’t offer the extra services that are common in more traditional stores like in-house bakeries. So, is everything really cheaper at Aldi? Probably not. But the store is banking on the fact that consumers remember prices on so-called known-value items or the basics like milk, bread, and eggs. If they see that those known-value items are cheaper at Aldi they might infer that other products will be cheaper there as well. With profits soaring, Aldi’s strategy seems to be working. The chain has seen double-digit growth in foot traffic recently as consumers, weary of sky-high prices in their usual supermarket, head to Aldi hoping for a bargain.
Discussion Questions:
1. Discuss Aldi’s focus on efficiency. How does it translate into value for the consumer? Why are Aldi’s private label items essential to its bottom line?
2. How does Aldi use consumer psychology to promote its stores as low cost locations? What are the implications of current economic conditions for the strategy?
Sources| CNBC: https://www.cnbc.com/2023/08/19/aldi-winn-dixie-deal-why-the-german-grocer-is-expanding-in-the-us.html; WSJ: https://www.wsj.com/video/series/the-economics-of/why-aldi-is-the-fastest-growing-grocer-in-the-us/B4D67E06-87DB-4356-BEAC-82054C689D4D; CNN: https://www.cnn.com/2022/10/08/business/aldi-discount-grocery-inflation/index.html; Unsplash: Photo by Marques Thomas on Unsplash