Aldi: Dark Horse Encounter

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1. Porter’s Five Forces Model in USA Supermarket Industry

• The Threat of New Entrance (Low)

In the USA supermarket industry, the threat of a new entrance is relatively low. This consideration is achieved by the advantages that already had by the incumbents. For example, Walmart that was considered as a leader in sales for supermarket in USA,[1] Walmart even already grasped the US market share in 1990 with 41%[2], Walmart had a market presence, buying power and breadth of inventory. Moreover, Walmart also spent large amount of capital investment for its IT division and distribution logistics. Walmarts had IT capability to check individual product sales. In consequences, Walmart is the only retailer that can provide real-time
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However, with the advance of technology nowadays, especially internet and mobile device create a chance that the supplier like farmers to sell the products directly to customers using delivery service.

On the other hand, the situation of the suppliers for discount grocery store like ALDI is no difference, the bargaining power also considered as low. If supermarkets use the brand power to bargain with the supplier, discount grocery store like ALDI use a different method. First of all, unlike the supermarket that provide national products, ALDI use private brand. However, ALDI set a strict quality control for their supplier; this is to make sure that their private brand could compete with the national brands that are offered in supermarket. ALDI also gains strong trust among their suppliers because ALDI consists with the price that has been deal with a supplier. Finally, for the employees, even though ALDI impose a secrecy policy, ALDI pays their employees fairly, even higher than national averages.

• The Threat of Substitute Product (Moderate to low)

The threat of substitute product has a connection with the threat of a new entrance. One of the reasons of low threat of a new entrance is because of high capital investment to compete with the incumbents, especially with Walmart. That barrier also makes the threat for substitute product can be considered as low, but there is a

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