The battle between Aldi and other grocery chains has been raging for a while now; from the price war with Walmart to earmarking $1.6 billion to upgrade stores to be more Whole Foods-esque. But just how can the relatively small supermarket chain compete with bigger chains and win over customers?
That’s the question The Wall Street Journal set out to answer. By looking at Aldi’s sparse public fillings, executive interviews, and internal documents, The WSJ was able to chip away at the chain’s secretive playbook, uncovering just how it plans to conquer its competition.
The WSJ offers a fairly full look at Aldi’s history and business plan. You should check out the full post, but in the meantime, here are five things we learned.
1. A Different Grocery Store
Aldi has long been known for its low prices and sparse product choices.
This was always the plan, the WSJ reports, noting that brothers and founders Karl and Theo Albrecht knew they wanted to offer something different from traditional grocery stores.
The duo relied on simplicity and streamlined processes to keep overhead costs low, and in turn, the costs for customers low.
For instance, the brothers aimed to keep waste — and costs — low at their stores; from asking employees to turn off lights when the sun was out to reconfiguring bathroom hand dryers to use less energy.
2. Fewer Name Brands = Lower Prices
One way the company has been able to keep its costs down is by offering a small stock of name brand products.
The WSJ reports that by only offering one or two name brands of any select product, Aldi is able to negotiate lower prices with suppliers.
Additionally, limiting their inventory has allowed the company to sell products for less. Things that cost less, often sell faster.
3. Keeping Overhead Low
Unlike chains like Walmart or Safeway, which offer tens or hundreds of thousands of products, Aldi typically offers just a few thousand or less, The WSJ reports.
With fewer products on its shelves, Aldi doesn’t have to operate giant stores. This allows the company to pay less in overhead — rent, energy costs, and other expenses.
Less overhead means there is less of a chance that Aldi is passing on its own costs to customers.
4. All About Quality
By keeping its product selection lower, The WSJ reports that Aldi is able to carefully choose and test each item it offers.
For instance, the company’s headquarters houses a test kitchen where executives and buyers can sample the products sold in stores and compare them to the competition.
Ensuring that the products it carries are of high quality is just another way the chain is able to court and attract customers with a higher level of discretionary spending.
5. Just Good Timing
Aldi’s expansion in the U.S. is also just a matter of good timing, analysts tell The WSJ.
Now more than ever, shoppers are looking for a convenient, quick shopping experience. That’s something Aldi is suited to offer.
With smaller stores and fewer brands to choose from, customers are able to run into an Aldi, walk down the pasta aisle and grab spaghetti, check out, and return to their car in just a few short minutes.