Sunday, May 10, 2015

Aldi on the verge of changing the grocery landscape

A Forbes article published last month characterized Aldi as a nuisance to many of America's most venerable food retailers and manufacturers, and called it a major force that is on the verge of changing the grocery retailing landscape.

The story cited Aldi's strategy of selling largely its own privately branded knockoffs of established American foods, while deleting conventional supermarket services. For example:

  • There are no counter service departments; everything is packaged and self-service;
  • Product is wheeled in on pallets;
  • There are no baskets;
  • Carts are self service and customers provide a 25 cent deposit that is returned when the cart is returned.

So, no service departments to staff, no stockboys, and no one needed to collect and manage baskets and carts. The only staff members in the store are forklift operators, a cashier or two, and possibly a third-party loss-prevention agent. That's quite a financial savings.

The end result is that Aldi has successfully deleted brand and pricing as a shopping variable. For example... looking for Frosted Flakes? They have it, and it's in a box that looks very much like Kellogg's Frosted Flakes, complete with a cartoon animal giving a thumb's up. And for many shoppers, this is a wonderful thing. It makes the shopping experience easier and quicker. Customers don't have to compare prices or think about brand choices, and there are no BOGO's, deals, coupons, endcap promotions or in-aisle shopper marketing promotions to distract them. Their shopping is done easily and efficiently.

Forbes also pointed out that Aldi has not yet reached the Rocky Mountains or westward, which means about 25 percent of the U.S. does not have access to the company's stores. So, there is plenty of growth opportunity, and plenty more grocery retailers to challenge.

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