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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Aldi is a progressive, discount retailer with several thousand stores around the globe, based out of Germany. Aldi's speedy checkouts and BYOB Policy are a part of their well known initiative to conserve time and money, by Bringing Your Own Bag(BYOB) and excelling at checkout efficiency Aldi attracts a wider variety of customer. Because of its uniqueness Aldi has over ten thousand stores in 18 countries. Aldi has many ways so that they can save money to keep their prices low which helps bring in customers and helps the customers save money as well. Aldi also has items called ALDI finds that are limited time only items. Aldi is so proud and confident in their products they offer a double guarantee. Aldi is more than just the high quality low cost price; they also care about community and more specifically they care most about children. Aldi also creates an environment where their employees are appreciated and respected. Aldi also provides room for their employees to grow and develop.

Lidl and Aldi are two privately owned companies that are both small operating discount food retailers. They are also similar in their customer approach where it is a self serve supermarket and incentivize customers to return through their sharp price format. Because their strategy is to provide the lowest cost in the grocery industry, both companies serve as Germany's toughest discount food retailers as they both move towards the US market. Both have won over the middle class customer and gained a substantial market share in the United Kingdom. In addition to their similar strategies and goals, both Aldi and Lidl are from Germany. However, they differentiate because Aldi has two major divisions and Lidl has one. Aldi's two major divisions are the Sued, which already operated more than 1300 supermarkets in the US, and Nord, which is already operating 418 supermarkets in the US. Aldi was the first discount retailer that made a huge success followed by Aldi, but Lidl has surpassed Aldi by having more stores worldwide with 10,000 stores between the United Kingdom in the United States. Although Lidl has more stores, Aldi has a greater range of countries that it has expanded to, which totals 18 countries.

According to Porter's five forces model, the threat of substitutions for Aldi relates to competitors in the grocery industry. Substitution is being able to keep the demand for certain products as low as possible, because there is a threat of customers switching to the competitors. One way to combat substitution would be to switch costs occasionally, giving customers the lowest costs in certain items in the store. The main competitor Aldi is threatened by is Wal-Mart. Aldi competes with Wal-Mart and other grocery stores by having lower prices.

This would be a strong force because any customer could have their own preference on what grocery store they would like to shop at.

The threat of new entrants in Porter's five forces model would be a weak force for multiple reasons. Aldi is a discount grocery store; many of their prices are lower than other local and supermarket grocery stores that they compete with. Also, many consumers are brand conscious, so brand means more to them than price. Grocery stores with loyalty incentives do have an advantage. This encourages consumers to keep going back to that certain grocery store, which Aldi does not have.

Aldi has a strong bargaining power of consumers who purchase a large amount of products at very low price. Standardizing of the products in market like Aldi makes switching price to be hard. Especially Aldi whose most significant advantage is low price, they won't change the price which means giving up their biggest power. So the consumers power become stronger.

Jobie Bargaining Power of Suppliers - The force of Bargaining power of suppliers in Aldis is mainly concentrated on the fact they are a German based company. During seasonal times, they have the best deals on German based products. They can essentially charge what they want for those products since they are directly tied with Germany. This makes the bargaining power of their suppliers a strong force.  Aldis also has close relationships with their limited suppliers. They make all their payments on time and they have a limited number of products they purchase and sell to their customers. The limited number of things they sell insure they never have an overstock of any inventory. Them eliminating the risk of having overstock reduces their bargaining power of their suppliers being a weak force. This force works with the force of customer bargaining power because with consistently low prices on needed items customers are more likely to continue to shop at Aldis.

Jobie Rivalry- The rivalry force in Aldis is very high and should be considered a strong force. There are many other stores and local based supermarkets that offer the same type of deals and bargains. For example, the store chain Marsh located in the Midwest is also a small chain that offers their own bargains on many foods based necessities. Aldis battles against the strong force of rivalry with their close relation to their suppliers. The bargaining power between them and their suppliers allow them to compete with other stores.

Aldi's competitive strategy emphasises focus and cost. This means that Aldi doesn't compete across the entirety of the industry, but instead only sells the weekly essentials. By having a narrower selection of products the company can cut costs by eliminating waste through specialization. Aldi stores offer a narrow selection of 1400 high-volume “must have” products as opposed to the typical 40,000 or more by supermarket giants. Because Aldi only offers products with high turnover, Aldi's overhead is lower.

 This cost cutting strategy can be seen by numerous other decisions that Aldi makes. Customers “rent” a cart by depositing a quarter, and return it at the end of their trip, which eliminates the need for Aldi associates to corral them. Customers purchase bags, or bring them from home, and bag their own groceries.  Boxes are designed with colors that blend in with the product packaging – an effort known as the “invisible case” project. Products with high movement, like flour and sugar are left on the pallet. Milk arrives on racks so that 80 gallons can be shelved in mere seconds. Produce is individually packaged and sold by the unit to avoid weighing at checkout.  New stores use a lot of natural lighting, while older stores are being retrofitted with energy efficient lighting. This combined with the reduced store hours means the store doesn't require lighting after dark; saving even more money.

Cost saving methods even extend to the hiring process. Aldi employees are well trained to multi-task. Only 3-4 employees are required per shift, which helps keep costs down. They are put to use in all aspects of running a supermarket: stocking, cleaning, and checking out. Stocking the shelves is also much faster because products do not have to be taken out of the box at Aldi. A typical Aldi store stays open during the busiest of shopping hours. However, staying open late into the nights would simply add labor costs and raise prices. Stores use energy-efficient refrigeration and lighting.

Through specialization Aldi has managed to become the price leader, in comparison to Walmart, on everyday items such as lunch meats and fruits to paper products and even diapers and razors. Aldi compliments this price leadership with seasonal product diversity, supplying German based products other companies cannot offer. Aldi further cuts costs by adopting a centralized distribution strategy which eliminates need for store deliveries.

This cost savings strategy manifests to attract a customer, who is not narrowly defined but rather attracts customers who are interested in high-quality groceries at everyday low prices. This can be seen by their marketing strategy which cuts the costs of traditional and costly media promotion as part of their overall business strategy to keep costs low. The cheap price of groceries creates a lot of excitement and generates heavy word-of-mouth advertising. While this makes it difficult to define the typical Aldi customer by age, wealth or political/religious ideology, forum comments by Aldi customers range from single mothers to elderly couples, it enables Aldi to define their customers much more flexibly than other more traditional discount retailers. This allows Aldi to reach more diverse groups of people and spread their cost savings to more people.  

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