Zeke Turner of The Wall Street Journal describes Aldi’s “unlikely proposition” to win over “spoiled American shoppers”. Their strategy of offering a very limited selection of high quality products, combined with rigid overhead cost control and a no-frills atmosphere, is attracting people from all socioeconomic levels. It offers a lesson for struggling American grocers and retailers as they combat dying malls and competition from online retailers:
“It offers a deliberately pared-down selection, sometimes a tiny fraction of the number of items sold by rivals, which helps Aldi cut costs to levels U.S. grocers can only dream of. Among other benefits, fewer items means faster turnover, smaller stores, less rent, lower energy costs and fewer staff to stock the shelves. That parsimony enabled Aldi to establish itself in Europe and then launch into the U.S.”
“By keeping costs low, the Spartan assortment allowed the founders to sell their inventory for less and turn it over at lightning speed, boosting profit margins, according to former executives.”
One of Aldi’s strengths that has eluded many discounters is its ability to draw middle-class shoppers–those with more money to spend–despite its limited array of goods. It did this by cultivating the image of a company focused on quality rather than pinching pennies.
“Poor people need us, rich people love us,” Theo Albrecht used to tell executives, according to Mr. Brandes, the former board member.
Read the original WSJ article here.