ALDI - THE DARK HORSE

DISCOUNTER

SDM PRESENTATION
GROUP 2

Karthik Raghuram 2111090

Nivedita Hedaoo 2111097

Anandarup Bhowmick 2111311

Pravallika Kakkireni 2111395

Urjaa Roy 2111424

INTRODUCTION
Started in 1948 by German brothers Theo and Karl Albrecht. In 1960, the company split into 2: Aldi- Nord
and Aldi- Sud (Albrecht + Discount = Aldi)

International expansion:
a. US Market:
•90% of Aldi's US assortment is private label products.
•One US Aldi distribution center served 55 stores.
b. UK Market:
•Aldi opened 100 stores and haven't compromised on private labels and operating
model which helped them gain grip over UK market
•Aldi dominated all big 4 supermarkets, Kwik Save even went bankrupt in 2007.

Operational Model:
•They limited store manager independence.
•Limited selection among its limited assortment.
•Double guarantee to any product which did not meet quality standards
•Followed bare-bones design
•Fully trained employees and operates with minimal employee count
generating more revenue/employee
ALDI'S STRATEGY

Key Strategic choices of Aldi: Narrow Cost Leadership

Low no of SKUs (Average SKU per store =1400)

Offers limited selection among its limited assortment of products
Achieves reduced Inventory Costs and shopping trips speed-up. Broad
Use of Private Labels ( 90% private label share)
High margins leverage available on private labels
Focus on backward integration by acquiring the private label brands Arena
Supplier Side Efficiency (Average Annual Inventory Turns = 52)
Provides shelf space to limited suppliers for each SKU.
Narrow
Quick Inventory Movement helps suppliers achieve economies of
scale and higher profit margins

Operational Efficiency (Average number of employees per store = 10 ) Cost Features

Cross-trained employees reduces the need of no. of employees per store Advantage
operation

Store location and Customer experience Targets specific customer segments and
Stores are located in highly dense areas, to offset high rental costs it provides least-cost alternative
follows bare-bones design and low budget ambience
ALDI vs. WALMART
Walmart – One stop shop
1.Customer profile – Middle class, family,
prefer buying branded items in bulk for
monthly usage, Urban
2.Wide product range and selection
3.Brands + Private Label
4.Leverages bargaining power with
suppliers
5.Large store outlets, relatively farther
6.Well staffed stores. Big store sizes
(Average store size - 182,000 sq ft)
7.High leverage of technology such as
machine learning, cloud-powered checkout,
and pickup capabilities. Analytics-driven
inventory control.
Aldi – The first shop
1.Customers profile – Lower Middle Class,
prefers fresh foods from neighborhood
stores (convenience to shopping
experience) , Urban
2.Limited product assortment and limited
selection
3.Private Label
4.Long-term supplier relationships
5.Convenient store Locations
6.Thinly staffed stores and small, bare bone
structure (Average store size- 8 -15000 sq
ft)
7.Strategic use of IT systems for
procurement, sales and inventory
management but does not leverage
advanced technologies
Comparing cost structures - Walmart Vs. Aldi
Sources of competitive advantage in
Supplier Efficiency:
Cost structure comparison in same category - Groceries
1. Ability to achieve 12% discount on the
Aldi Groceries purchase price
(price range – 2. Less competition between suppliers
Walmart Walmart  Aldi​
Item​ 15% - 20% enabling better relationships
Overall​ groceries​ Overall
lower than
Walmart)​
Sources of competitive advantage in
Sales​ 100​ 100​ 100​ 80 - 85​
Operational Efficiency:

COGS 1. Reduced employee cost

(purchases 2. Reduced advertisement costs
+ in-bound 75​ 78.75-77.5​ 83​ 66.4 - 70.55​ 3. Stores are located in high-density
logistics +
shopping areas , hence high rental costs.
Shrinkage)​
Since proximity to target customers in
high-traffic areas is required, these costs
SGA​ 17.5​ 17.5​ 12​ 9.6 -10.2​ are offset by bare-bone store design and
low-budget ambiance
Operating
7.5​ 3.75-5​ 5​ 4 - 4.25​ 4. Stores do not offer parking and packing
income​
bags incentivizing customers to visit
frequently
ALDI vs. WALMART (Contd.)

Should Walmart be worried about Aldi?

Reduce prices further?
Not possible because the margins are already thin
Increase no of private labels?
Private labels will have to compete with established brands for shelf space and
big brands will threaten Walmart, also private labels will find Aldi more attractive

Should Aldi be worried about Walmart?

Increase variety?

Tough to execute because the variety increases competition between the

Conclusion
suppliers for shelf space and hence reduces their volumes, reducing supplier
efficiency. Neither Aldi nor Walmart should really
worry about each other as they draw
Increase store size and enter different categories? competitive advantages from different
areas
Walmart – Bargaining powerdue to IT
Operational efficiency achieved by highly cross-trained employees will be and distribution logistics
compromised and different products offered on weekly basis (electronics) for huge Aldi – Bargaining power due to less
discounts may be manufacturing surplus, and may not be available long-term SKUs and private labels

04
ALDI vs. AMAZON
Is Amazon a direct competitor of Aldi?
Amazon has roughly 30 Amazon Go stores in operation or planned to open soon
Amazon Go is filling a gap for young families and professionals that want the Walmart Experience
Conclusion
but want quantity at lower price
Amazon is
Amazon’s “Just Walk Out Technology”
entering Aldi's
Aldi has entered the checkout-free shopping race, launching its first “Shop&Go” store in Greenwich- turf via Amazon
Street lets customers simply pick up shopping items and walk out without scanning items or going to a fresh, Aldi can
checkout leverage the
omnichannel
Should Aldi be worried about Amazon? business model
Delve into omnichannel strategy to enter new
Aldi can launch new product categories like electronics to partially offset diminished foot traffic in categories while
retaining its store
physical stores by boosting investments in online acquisition
format to
Substitute in-store personalized interaction with virtual and digital experience- enjoy experience of retail compete with
setting in the comfort of their home Amazon.
Physical locations turned into temporary/permanent fulfillment nodes

"Zero Friction" Digital Experience and Post-Covid

Improve "shopability" of social channels such as site speed, stability, delivery times, design web pages.
Seamless product search and customer journey on Amazon
VR, AR, machine learning and computer-vision techniques-increased conversion rate of shopper
Safe delivery modes-including curbside pickup and aggregator delivery, no-contact payments
Tech enabled stores like Amazon Go, customer input, real-time tracking of consumer trends and behavior
shift, agile operating model 04
Large Indian Retailers

1. Broadly cater to middle-class and upper-middle-class sections of the population

2. Most Store locations in Tier 1 and Tier 2 cities with plans of expansion to Tier 3 cities
3. The typical Product Mix consists of Foods (groceries, staples, frozen foods), Home care, Personal care products,
Apparel, and general merchandise (crockery, plastic goods, home appliances)

D-Mart Reliance Retail Star Bazaar

Major focus on brands than on private
label products
Stores are self-owned with located in
high-traffic areas
Neighborhood supermarket store
format with an average store size of
30,000 sq.ft
D-mart follows a low-cost interior
concept i.e less focus on customer
experience.
Focus on both brands and private label
products.
Rental stores with a presence in high and
medium-traffic areas.
Follows multi-prong strategy, i.e operates
in the supermarket, hypermarket,
neighborhood convenience store, and
online store formats
The goal is to target consumers who are
already actively interested in their product
or service through omnichannel
Major focus on private label products
(TATA-owned brands- Fabsta, Skye,
Klia) than on branded products
Fewer number stores with presence in
metro cities and two different formats -
hypermarket (Star Hyper) and
supermarket (Star Market)
Offers around 30,000 SKUs overall.
Learnings for large Indian Retailers

Most Indian retailers' strategies lie in the middle of Aldi and Walmart's
strategies

1. In order to be hard discounters, these retailers need to adopt more private labels and focus on long-
term partnerships with suppliers which will bring supplier efficiency.
2. To learn from Walmart, retailers should use advanced technologies for procurement and inventory
management as well as improve customer experience.
3. Of the 3 compared Indian Retailers, Star Bazaar can learn from Aldi whereas Reliance retail can learn
from Walmart.
4. D-mart has operational efficiency and inventory management tools. It follows both Aldi and Walmart.
D-mart can shift to private labels and accommodate high-margin businesses for better margins.

Major Indian retailers significantly lag in e-commerce and maintaining an

omnichannel presence

1. Partnerships with local Kirana stores can maximize neighborhood sales. Buy Online Pickup from store is
a good model to start with.
2. Dual Purpose use of stores - stocking products but also using them as fulfillment centers for online
ventures.
THANK YOU
FOR YOUR ATTENTION