Task 2: ALDI

Please read the Aldi Case study below and answer the questions at the end.

For completion in week 5 of your module.

Aldi: Changing the Landscape of Grocery Shopping

According to a recent study by Nielsen consumers used to prefer stock up visits. Now 46% of them view shopping as a chore. The one stop shopping experience that had taken most of the world by storm a couple of decades ago is changing and ALDI, a German supermarket, is pioneering the way. Stores like ALDI focus on efficiency and challenge the traditional supermarket model, which operates on thousands of square metres and offers a wide variety of choices. ALDI caters to the needs based shopping clientele who make frequent visits to the store rather than stocking up during one visit.

ALDI leads the way for the increasing number of companies that are developing business models to appeal to this segment of consumers.

Founded in 1946, ALDI is a discount groceries chain that has gained substantial ground because of its operations management. The company currently has 10,000 stores in 17 countries across Europe, Australia, United States and most recently China. The company has been developing its successful business model for decades splitting operations in Germany between Audi Nord and Audi Sud in 1960 and 1962 respectively and expanding its international operations since 1967.

As part of its business model, ALDI generally operates on 1000 to 1500 square metres of space, compared to the approximately 4000 square metres space utilised by many traditional supermarkets. Sites to accommodate smaller stores are easier to find close to target locations like city centres; This eliminates customers having to travel great distances for grocery shopping and encourages frequent visits.

The smaller store size also naturally reduces the number of products that can beoffered. But then again, who needs 35 different varieties of ketchup to choose from?

ALDI carries only a few variants of each product, sometimes limiting the choice to one. This approach reduces the total number of products carried to approximately 10 to 15% of traditional supermarkets selection. This enables for more efficient inventory management because planning and forecasting for one or two products instead of dozens is easier and reduces the chance of stockouts open brackets shortages closed brackets and products exceeding their shelf life.

For some small stores, this also reduces the hassle restocking the shelves. This, however, is not a problem for ALDI. For many products ALDI suppliers ship them in boxes that can be kept on the store floor as it is and the customers can select the products they want from the boxes. While improved efficiency may not be immediately obvious, the measures allow for fewer employees working in each shift with many of them being able to move between stocking shelves and managing the cash register as needed.

In addition, ALDI’s reliance on its own exclusive brand products reduces overhead costs and increases efficiency of management while still providing quality products, which makes it highly competitive in a cut throat industry. It also builds brand awareness and, as the sole supplier of each products increases customer retention.

Question 1: ALDI and similar stores offer different customer experience. Do you think a similar business model would work in other industries? Please give examples to illustrate your answer.

Questions 2: What are the sacrifices customers have to make in order to have access to this shopping experiences?