ALDI- A GERMAN RETAILING ICON
FINAL CASE ANALYSIS- Sales & Operation Planning
Submission date: 5th November 2021
Submitted by: Sargam Jain
ALDI strategy
The German-based grocery store chain, Aldi, recognised the importance of providing low-
cost yet high-quality products to its customers, and formed their strategy on the basis of this
very insight. Achieving operational efficiency was at the core of their strategy to ensure that
they could provide products at prices cheaper than their competitors.
Their strategy could be summarised by the points mentioned below:
• Streamline business operations by focussing on only the necessary.
• Carry out Lean Operations to save time, space, effort and energy. By doing so, they
were also able to substantially reduce their costs, increase their profits and invest it to
further expand their operations.
• Ensure that products comply with the highest quality standards.
• Pass the savings onto the customer.
Tactics (or areas worked on) to deploy this strategy
1. Provide low cost products
2. Be as frugal as possible
3. Offer high quality products to customers.
4. Reduce time wasted in unnecessary business operations.
5. Ensure smooth functioning of supply chain activities and maintenance of optimal
level of stock at stores
6. Reduce occupancy and operating costs.
7. Human Resource Management
Different actions under each tactic, with metrics
The following table will list down the different actions taken under each tactic highlighted
above, along with the suitable metrics.
TACTICS Different Actions taken Metrics
1. Provide low-cost • Offered a wide range Benchmarking with other
products of private label supermarket chains, Total
products so prices sales, Foot traffic, Basket
could be determined size, year-on year growth,
by them. Customer retention/
• Limit each store’s conversion, Brand
assortment to 900 Awareness
SKUs as this would
cut down on
expenditure
(economies of scale)
• Offer low quantities
of high demand
goods like computers
and bicycles to
ensure to sell stock
as quickly as
possible
• Offer products in a
standardised size.
• Source products
from local suppliers
to reduce logistic and
other costs.
2. Be as frugal as • No heavy costs Net Profit margin, Return on
possible incurred on Advertising spend, Cost per
advertising. Acquisition
Promotion of offers
done through low
cost mediums such
as flyers, in-store
promotions and on
company website.
• Avoid costs on ISO
9000 and other
certifications
• Avoid publicity and
public appearances.
• No luxury in the
office
• Technology to be
kept at minimum.
• Back-office staff to
share computers.
3. Offer high quality • Carry out strictly Defect Rate, Customer
products to enforced quality satisfaction, Quality Control
customers. tests. (sampling), Customer
• Daily taste tests of complaints/reviews
fresh produce.
• Accept all customer
returns without
question.
• Replace damaged
products with
undamaged ones
when necessary.
4. Reduce time wasted • Larger barcodes on Cash conversion cycle,
in unnecessary items to ensure Operating cash flow
business operations. speedy checkout.
• No budget forecasts.
• No external market
research
• Fast cash-to-cash
cycle
5. Ensure smooth • Follow Just in Time Low Inventory Carrying
functioning of supply Inventory method Costs, Space Utilization,
chain activities and • Offering a limited Stock Turnover, Inventory
maintenance of assortment of Turnover
optimal level of products, enables
stock at stores them to offer high
volume of basic
goods and helps to
streamline efficient
operations
throughout the
supply chain.
• Continuous
inventory flow 5-6
times a week.
• Storeroom to not
hold goods for more
than one day.
• Avoid any stock
outs.
• Make unloading
simple. Make items
ready for sale as
soon as possible.
• Cold chain products
to be shipped in
specific size
containers that can
be stocked as it is in
the retail outlets.
• Automatic report
generation of items
that need to be
restocked.
• Choose competent
suppliers.
6. Reduce occupancy • Limit timing of Space Utilization, employee
and operating costs. stores to maximise productivity, Sales per
sales during peak square foot
demand which
resulted in lower
labour and power
costs.
• Smaller store sizes
with up to 4 aisles
unlike other
supermarket chains
• Open stores in low
cost districts.
• Used economical
designs and
functional fixtures in
store
• Reduce personnel
costs by hiring a
minimum of 3-7
people per store.
• Retread tyres and
place wind deflectors
for better mileage/ to
reduce the cost of the
truck fleet.
7. Human Resource • Employees are paid High Employee Satisfaction,
Management salaries higher than Low Employee Turnover,
industry average. employee utilization rate,
• Hold Training
programmes for
employees to upskill
them.
• Diverse job- Allow
them to have flexible
roles by taking part
in multiple tasks.
Future of ALDI and its main competitors
The retail industry is highly competitive in nature. Supermarket chains like Walmart,
Carrefour, and Lidl, are key rivals and pose the greatest danger to Aldi's global dominance.
Aside from the pandemic's unpredictably long-term repercussions, Europe is still being
rattled by the ramifications of Brexit. These significant changes, coupled with rising
customer demands/expectations, pose a danger not only to Aldi, but to all retailers.
Going ahead, the companies that adopt new technology that enhances customer experience,
will be the ones that stay ahead in the game. Hence, Aldi should increase its spend on
technology and solve customer problems in an effective and efficient manner.
