Aldi: The approaching rival

Aldi is impressive, isn’t it? Aldi was officially entered the Australian market from 2001, just after 15 years, it has become the third largest supermarket after Coles and Woolworths. According to the latest data show that its market share reached 12.1% in December 2015, at the same time, Woolworths’ market share fell by 1.2% last year, Aldi is gradually breaking the duopoly situation.

Although Aldi is not perfect, many consumers criticized its checkout need to wait for a long time, a lot of goods are often sold out, but what can be more attractive to consumers than competitive price? And Aldi product quality is not bad.

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Almost everyone knows that the retail industry is a very high threshold industry, it requires a lot of capital, excellent management, at the same time, also need a higher level of marketing, so, how does Aldi do it?

A netizen commented:Well, the difference is that the others say that they are cheap… while Aldi actually is cheap! In reality, only some and low-quality products are available for cheap at the others. While Aldi has the philosophy that the cheap products need to be good too. Which is true for nearly every product there, from my experience.”

As we all feel, Aldi has an unparalleled price advantage, thanks to its excellent cost control, at the same time, the pursuit of simple and efficient, is the core creed of corporate culture.

Strategy of Aldi

Accurate positioning and reasonable layout

The primary target customers at the start of the Aldi were low income people, but now it has developed to the extent that it has been accepted by all consumers.
Store location is generally concentrated in the area of the residents, but the store area is often only 1/3 of large supermarkets.

Pay much attention to cost control

One of the reasons that Aldi maintain the competitive advantage in the industry is it keep controlling the operating costs everywhere.

Although the daily work is very busy, there are often queuing shopping, but the business area of each shop is no more than 300 – 200 square meters.

In order to save operating space and time, commodities were in their original packaging for sale. Customers need to pay for shopping bags. In this way, they save the cost of packaging, and prevent environmental pollution.

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In general, every stores have only two cashiers,  3-4 staffs, everyone wears several hats, no fixed position. Can be described as “generalist”. When the business is busy, two employees work at cashier, when it’s not busy, one of the staff immediately go to organize the goods.

Aldi operates only 600 to 800 kinds of goods, but each of the products are carefully selected. This simplified business model has reduced the difficulty of purchasing, storing, selling and managing the goods. Thus reducing the cost of business operations and management.

Win the public at low price

Aldi’s sale principle is high quality with low price, all goods should be pushed to the market with the lowest price. Aldi’s low price benefits from its bulk procurement. The prices are cheaper up to 10% – 20% than other supermarkets, and sometimes even 50% cheaper.

Aldi also establish alliances with many manufacturers, the latter sell OEM production to it. Many manufacturers admire Aldi’s strong purchasing power, so they sell products with different brand on it, compared to the original brand products in other supermarkets, it’s much cheaper.

Guaranteed quality

In people’s concept, no good goods cheaper,Aldi is how to ensure both quality and inexpensive? Firstly, global sourcing. Where the goods are competitive, where to purchase; secondly, sell some self-produced goods. In order to ensure the supply of quality and stability, Aldi invest some factory to produce for itself.

 

Strategic alternatives

According to porter’s generic strategies, companies need to focus only one strategy among “cost leadership, differentiation, focus”. But actually, Aldi did excellent in all of these, firstly, it did cost control especially well which directly increase the profits, in differentiation aspect, its only 600-700 kinds of commodities, with proper quality control, this is also the product differentiation to some extent, in addition, it is paid enough attention to “focus”.

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Is Aldi able to maintain the momentum of development? Even surpass Woolworths??

Aldi should continue to pay attention to the external factors that affect its development, in the marketing environment analysis, competitor and economic should is the most important factor, Woolworths and Coles have felt the threat brought by Aldi, and also introduced a lot of discount activities, and their brand awareness in the minds of consumers is very high, Aldi should always pay attention to competitor”s strategy, and respond.

SWOT analysis

Strengths: obvious price advantage. Global sourcing, supplier price advantage
Weaknesses: market share compared to the two major competitors are still at a low level. In the minds of some consumers, Aldi is a low-end supermarket.
Opportunities: if Aldi do some advertisements, it may win a greater market share.
Threats: facing the pressure of rising of raw material prices. Competitors have begun to give response.

 

Reference

http://www.roymorgan.com/findings/6762-supermarket-sweep-aldis-share-of-aussie-market-still-rising-201604142258

http://www.fool.com.au/2016/04/15/aldi-is-stealing-market-share-from-woolworths-limited/-

http://www.news.com.au/finance/business/retail/moodys-rings-aldi-alarm-bell-for-coles-woolies/news-story/5fa28b85abb45c9e06b89b1c9f502fea

http://www.businessinsider.com.au/aldi-has-increased-its-market-share-again-2016-4

 

 

Tianyi Wang

214237144

watiany@deakin.edu.au

 

 

 

 

 

 

 

 

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Aldi: The approaching rival

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