Aldi Discount Supermarket
In the world, business keeps changing in their operations quite very fast. The changes may either changes in technology, tastes, and preferences of the owner or the customer’s as well as some other factors. It is, therefore, necessary for a business entrepreneur to make decisions on what to change and what they should retain with regard to the kind of competition that is put forth in the market. From this, Aldi started a discount shop that grew to change the operational ways in Britain right from simple, functional ways outdoing the competitors as well as making them adopt some of Aldi’s operations. Some of the factors that made Aldi be successful include similar layout, a small range of products, lower staffing numbers in the smaller stores, custom shelving, among others.
Aldi comprised of small stores that had a similar layout. The layout of the store was about 1,125m2 in its dimension that made it easier for the navigation of the aisles by the shoppers around. The shops also had a smaller store format that meant that lower staffing is quite adequate. On average, the stores could hold up to thirty to forty staff effectively. This said that on average, the shoppers could take the shortest time possible approximately 27minutes because of the store sizes (Chatterjee, 2017). That is so much convenient for both the customer and the store manager since the management of the store will also be quite easy compared to other big stores.
Aldi store also had a small range of products. With this, Aldi believed that it saves money wastage by careful selection of products. The products could be the most preferred products in the market or the most unavailable products in the market. In their stores, it was speculated that their product lines were relatively low as 1750 if compared with major supermarkets with more than 40000 products (Chatterjee, 2017). For instance, there is only one variety of tomato ketchup stored in Aldi’s stores compared to 20 or more condiments in the supermarkets. With one product line Aldi is able to buy goods in bulk, thus reducing the overheads in terms of transport costs.
Moreover, Aldi is a low-cost operator business. During their starting period, they hired a second-used building that cost them low rent, although they sold less than 500 items. Nowadays, they are able to do profit ramifications due to their shopping experiences. Like most other retailers, the variable cost for the hand discounters is labor, as well as the value of the system that is designed for higher labor productivity. Most products also flow directly from the stores to the display floor, creating minimum time in the backroom. Consequently, labor is boosted by cashiers who rapidly scan the products into a shopping cart while on a separate counter, the customers do the bagging (Chatterjee, 2017). Some of the costs they incur are energy costs to the frozen displays and lighting, maintenance costs on the quality display fixtures, shopping cart expenses helped by customers by making deposits of 25cents.
The mechanism for trend planning. Aldi has a specially selected team that does the preparation for the middle part of the supermarket that is done a rotation every week. Effective planning is therefore done and planned in a year advance so that Aldi gets the best prices overall for the products. That means there may be some offers of a product in the store at different times of the year (Chatterjee, 2017). For instance, there may be some offer in England store that sell rugby fleece at a discount while in another time of the year another product such as the ski wear is on promotion. These type of operations gives the store some economies of scale and attracts more customers at different times of the year.
The following core values defines Aldi’s model which include, ease consistency, and accountability. Aldi unlike with other supermarkets do not entertain periodic deduction vouchers. These makes it more engrossed in cheaper price products twenty-four hours a day per week. The company is also consistent to dealing with stores, customers as well as employees. Consistency in the company leads to reliability thus positioning an everyday discount supermarket (Schmid, Dauth, Kotulla, & Orban, 2018). Aldi also focusses on simplicity clarity and efficiency that are emphasized by a no-frill shopping experience. The company also values responsibility for its customers, employees and other parties it deals with. Aldi therefore pays its employees well thus increasing the efficiency and more customers satisfaction.
Question 2
Aldi leaders have so far adapted several methods and ways in which they opt to run and control their business to avoid so much competition from the competitors. Some of the methods are thereby include the following. Change of the product mix, a shift to gross product margin strategy, low price reputation reinforcement, secure customers communication and total store mechanization as well as promotional strategies.
The Aldi leadership has agreed to change the product mix. Changes in the product mix can be clearly identified in their store’s layout. That includes the revision of the space provision of nearly five to ten years ago. The decision has contributed to a full-scale produce department approaching almost a hundred items. They also have doe some more extensive work in meat pre-package and dairy expansions. More extensive work has also been done with the frozen foods thus stocking beer and wine in most locations (Lehrer, & Schmid, 2019). There is a record of a change in most of the aisle of groceries in the store with general merchandise increasing the attention to the first aisle. For this reason, they have thereby expanded the premium product lines allowing the shoppers to trade.
The leaders have also decided to shift the gross margin strategy. Aggressive cost management continues to be practiced in Aldi stores with a fraction of the assortment being offers of a traditional supermarket. For instance, Aldi generates profits from premium products, general merchandise. That has allowed them reach really aggressive price points as well as delivering the services quite more effectively (Tuleja, 2016). Profit reserves are also generated early to the sales of higher margins that they use to drive in three to four weeks as the spending slows down.
There is also have a plan of reinforcing the reputation of low price. The management have considered maintaining and protecting their reputation of low price through combination of aggressive pricing for promotion with the stable shelf pricing on the basic staples. For instance, they consider promoting highly consumable products such as milk, avocados, bananas, eggs or meat since they have a recognizable price point. Aldi is therefore, sensitive of the local competitor’s price thus the need to keep a shorter range of price points in their head (Lehrer, & Schmid, 2019). The manager therefore seems to have some discretion to prices of eggs, some of the meat products, bananas among a few others so as to beat the competition. Keeping a focus on the staple grocery items often also helps to maintain their low-price reputation. These may include products like sugar, flour et cetera.
Maintenance of a secure communication with the shoppers. Lack of constraints from the departmental silos improves the ability and character of Aldi as a god communicator with the shoppers. That helps them to score across the entire store without upsetting whether the department cares the idea to give additional space. Store mechanization is something that the done by the tradition retailers with the territorial nature of the departments limiting their achievements (Tuleja, 2016). For instance, a strong position is being carved around the theme of feel healthy through focusing on the organics, no hormones, artificial cloning or even trans fats.
Moreover, they are also practice total store merchandizing as well as promotions. Promotional retailers archetypally plan out ticket sizes and traffic for each week to accomplish their themes and objectives over the course of a specified period. Aldi thus does a natural job mixing a variety of products that may e indifferent departments. For instance, during Mother’s Day they made circulars of themes of treating mothers how to breakfast in bed (Tuleja, 2016). Aldi is also becoming more of a sophisticated store as opposed to the old-style grocery merchandise. The traditional circulars therefore divide the spaces between the departments.
Over the years Aldi has been performing very well almost conquering the market in England. Being one of the most successful discounts stores it has therefore attracted several customers as well as outdoing several companies so as to remain at the top. Numerous strengths as listed below have been the key to the success of this discount’s stores (Voigt, Buliga, & Michl, 2017). The strengths identified has not only helped Aldi in maintaining of the market but also helps in penetration and conquering of new markets. Some of the advantages include stable distribution network. This has helped in meeting new customers as well as exploiting new areas of work.
Aldi also enjoys an economy of scale through a vast and a reliable supply of the commodities they sell. The amount of raw materials in enormous quantities and in a variety of options gives Aldi an ability to overcome any bottlenecks of supply chain that they may occur in the industry (Tomasevic, & Spasojevic, 2018). Moreover, superb performances in new markets also gives Aldi a chance to build expertise to explore and make success of the new markets. New revenue streams can, therefore, be quickly create to diversify the economy cycles in the markets they operate.
Despite all these strengths, Aldi also experiences some weaknesses which if not well looked at and evaluated they may cost the store a lot of profits. The company, therefore, need to make deal to deal with the challenges they face so as to improve. Some of the weaknesses include, mismatch and lack of financial planning. Lack of efficient and proper planning may cost the profits of the company leading to collapsing of the business (Tomasevic, & Spasojevic, 2018). The liquid and the current asset ratios evaluated suggested that the company if well planned may use cash more efficiently than what is done presently.
Moreover, there is a high attrition rates in the work force. Aldi has a higher attrition rate compared to other companies in the industry and have spent a lot more money compared to its competitors. Through training and development of the employees, the company can be ale to sustainably maintain a relatively low expenditure (Voigt, Buliga, & Michl, 2017). A higher investment is an additional cost that the company incurs and may affect negatively the functioning of the company compared to its competitors.
In addition to that, Aldi needs to invest more on the new technology. Aldi has become a big company which explores new markets more often where people use different techniques. Aldi therefore, needs to put more investments on technology so as to integrate the processes in the board. In the meantime, there is a mismatch in the investment done in the company as compared to the area and the customers served by the company (Schmid, Dauth, Kotulla, & Orban, 2018). By the evaluation of this the company needs to do something tangible that can be sufficient in transforming the best out in the industry.
With reference to the topic of discussion, I have gained some skills that I can relate to either to starting of a new business or in running of an already established business in my area. Some of the skills that I have got goes as vast as in customer relationship, employee’s affiliation as well as even in business entities relationships. To start with, in comparison with Aldi’s core values, I can confirm and affirm to that when running a business, it’s imperative to gauge your customer relationship. That helps in creation of a better link that can provide you with the necessary information that could be vital for the running of your operations. For instance, nature of a kind customer relationships for Aldi gives the company a competitive advantage over other companies thereby improving their services to the company enabling it to expand the territories.
Moreover, I have also learned that any business starts to thrive faster through the empowerment of own employees. Employees are one of the essential organs of an entity and therefore can improve or fail your business enterprise. A good rapport with the employees thus could facilitates proper handling of the commodities on sale as well as excellent customer relationship. For instance, Aldi maintains a good relationship with the employees making it quite easy and possible to thrive.
In additionally, I have learned that what makes a company to thrive is not the quantity of the products it sells but the quality of the products and the preferences of the market. Stocking up of products in an enterprise does not mean that it will attract so many customers but in deed bringing the commodities that the customers value so much depends most. An entrepreneur therefore, is supposed to learn the environment and identify a gap that will enable him/her to bring what is not available in the market. For instance, Aldi focuses most on the essential staple food that everyone must consume to survive. That enables them to make huge profits on a daily basis.
In conclusion, Aldi store also had a small range of products. With this Aldi believed that it saves money wastage by careful selection of products. Consistency, simplicity and responsibility makes Aldi unlike with other supermarkets do not entertain seasonal discount coupons maintains their products as cheap as possible. Aldi leaders have so far adapted several methods and ways in which they opt to run and control their business to avoid so much competition from the competitors. Which include; Change of the product mix, a shift to gross product margin strategy, low price reputation reinforcement, secure customers communication and total store mechanization as well as promotional strategies.
References
Chatterjee, S. (2017). Two efficiency-driven networks on a collision course: Aldi’s innovative grocery business model vs Walmart. Strategy & Leadership.
Lehrer, M., & Schmid, S. (2019). Strategic discipline: inconspicuous lessons from Germanic Mitte stand firms. Journal of Business Strategy.
Mehmood, S. T., Tahir, N., Kiani, S., Hammad, M., & Tahir, R. (2019). UAE Diverse HealthCare Compass. Archives of Business Research, 7(7), 188-206.
Schmid, S., Dauth, T., Kotulla, T., & Orban, F. (2018). Aldi and Lidl: from Germany to the rest of the world. In Internationalization of Business (pp. 81-98). Springer, Cham.
Schmid, S., Dauth, T., Kotulla, T., & Orban, F. (2018). Aldi and Lidl: from Germany to the rest of the world. In Internationalization of Business (pp. 81-98). Springer, Cham.
Tomasevic, N., & Spasojevic, M. (2018). Lidl’s Modern Business Operations in The Domestic and International Markets. Economic and Social Development: Book of Proceedings, 346-353.
Tuleja, E. A. (2016). Intercultural Communication for Global Business: How leaders communicate for success. Taylor & Francis.
Voigt, K. I., Buliga, O., & Michl, K. (2017). Striving for Customer Benefit: The Case of Aldi. In Business Model Pioneers (pp. 11-24). Springer, Cham.