BA 427 Business Policy
Aldi: The Dark Horse Discounter
Should Wal-Mart be worried about Aldi? Should Aldi be worried about Wal-mart? Do you believe Aldi to be at a competitive advantage or disadvantage relative to Wal-mart?
Both Walmart and Aldi should be worried about each other because both have distinct advantages over each other in bringing in customers. Aldi advantage is that its stores provide the lowest price in town with their products being on average 15-20% cheaper than Wal-Mart (pg 3). How it does this is by cutting costs and offering its products at the lowest possible price. This practice of cutting cost is best summed up by the Aldi motto “"When you buy a can of peas at Aldi, you're paying almost
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Also Aldi carry’s significantly less product per store with at each store carrying an average of 1,000 SKU and each store carries the exact same product. While carrying less products gives the customer less selection it allows Aldi to save money on overhead and allow them to buy in bulk. Aldi also does not carry any shelves in their store, but instead puts everything on pallets which means Aldi does not have to pay employees to box and put things on the shelves but puts the burden on the customer. By putting all the tradition retail duties to the customer such as boxing and bring back the carts Aldi is allowed to lower its prices for their customer. All of these store operating savings add up which is why it can be said that each store can be operated by as few as four employees. The other benefit and strategy Aldi uses is focusing less on name brand products but choosing more private label products. This allows them to save money because one Aldi is allowed to build partnerships, but also private label tends to be significantly cheaper with only having to sacrifice a little bit on quality. How Aldi combats this in case their products are unsatisfactory is that Aldi is willing to reimburse in full if a customer finds a product not to their liking. They also give out a weekly newsletter to showcase to their customer weekly deals to combat the fact Aldi does not