Aldi: Dark Horse Encounter

This force is low, because ALDI stocks just 1,400 “must-have” products. Since they only stock very popular items, it is unlikely that their suppliers are the sole company that can offer them. Therefore, if a supplier tries to hike up their prices, ALDI can simply change to another supplier of that product. Since products at ALDI have such a high turnover, it is also likely that suppliers compete with each other in order to profit from the consistent, large purchases made by ALDI stores. This makes the suppliers even weaker, since they are more likely to bend to the will of ALDI, instead of the other way around.

The grocery industry has a relatively high market commonality; a lot of grocery stores are somewhat related in terms of technologies used, labor force and the products or services offered in the stores. Differentiation with other competitors is key for survival in this highly competitive industry.

1.3 Physical Resources & Capabilities The ALDI brothers took over the family business of their parents in 1946. World wide expansion led to enormous growth. This comprises around 9800 stores (1000 to 1500 SQM each). The layout is simple with wide ails designed to refill shelves in the fastest, most convenient way {Brands, D. 2003}. They offer a small assortment of mainly fast-moving items (approximately 700 food – including a slim and organic line- and non food products). Small warehouses are located at the back of each store. Affiliates are equipped with limited technology such as intelligent cash systems high-end product concerning quality and price and bottle deposit machines. ALDI won the 2008 energy management award for great results in terms of cooling systems, illumination etc. Most stores have about 100 parking space and a shopping cart area near the entrance. ALDI has a long history which implies that they have gained great experience over the years. The location and layout of stores are designed to support fast and efficient supply and not especially aimed at customer needs. This is a weakness. Stores advantageously located as there are in convenient reach for consumers. Their product range is adapted to various consumer needs (organic, healthy living). The technological equipments are of high quality enabling fast operations at the checkout (ALDI’s staff are two times faster compared with other similar operations). This is

Threat of new entrants is relatively low. There are high barriers to entry in the discount retail market, including high capital costs, limited access to investors, and a largely crowded-out market place.

1. The grocery industry is a commoditized industry, which makes it difficult for grocers to sustain through differentiation. Buyer power is high and thus, cost leadership and operational efficiencies are critical. There is fierce competition amongst various grocery stores, with the main players such as Loblaw and A&P holding multi-banner stores in various market segments. Traditional grocery stores also lose some of their market share to drug stores, convenience stores and other retailers who have entered the industry. Threat of substitutes from fast-food and take- away outlets is not as prevalent, since many grocery stores have started stocking ready-to-eat meals and have deli services available for consumers. Competitive

The threat that substitute products pose to an industry's profitability depends on the relative price-to-performance ratios of the different types of products or services to which customers can turn to satisfy the same basic need. The threat of

From the time it opened, Aldi has expanded the number of product assortments that allow consumers to find nearly anything they need to supply and feed their families. Aldi developed a strong marketing program and decentralized their pricing and assortments that also include some well-known products. Aldi’s begins its value propositions to shoppers with its amazingly low prices. Their “hard” discount pricing, averages about 30% below standard supermarkets like Winn-Dixie or Kroger’s (Brick, 2016). They attribute their success and growth to the “hard discount” model as it has demonstrated to be highly effective. Aldi is different than “large” discounters like Walmart where Walmart’s varieties are limited in size and led by private label products, and investments are made in stores atmosphere, unfortunately, resulting in lackluster customer service. This allows “hard” discounters like Aldi to win the grocery price war by greater margins than Walmart, making Aldi a major competitor of Walmart (Bartone,

In the United States, the food retail industry is absolutely massive. According to Statista, this industry brings in nearly 5.27 trillion dollars annually and 594.4 billion of that is from grocery store sales. In this market, the 20-ton gorilla in the room is Walmart, racking in nearly 20% of the entire market at around 118 billion dollars in 2013 according to the Harvard Business School case study. Following Walmart, Kroger and Costco own the biggest next largest slices bringing in 76 billion and 71 billion respectively. In this highly competitive market that has some of the smallest margins of any industry it can be tough to get ahead and even tougher to grow. However, Trader Joe’s has managed to pierce what was once a very small world

Trader Joe's faces several threats to its business, as competitors try to invade the company’s niche and attempt to imitate the company’s core strategies. The supermarket industry itself faces a major threat, as larger chains such as grocery retailers Wal-Mart and Tesco have begun to open small-format stores that mimic the Trader Joe's approach. This invasion results in additional cost pressure for incumbents like Trader Joe’s, which had to let go employees in order to become more cost competitive.

Since 1962 and the beginning of the discount retailer market Wal-Mart has been ahead of the retail game. By 1967 there were 24 Wal-Marts that had grossed 12.6 million dollars. In just 7 years Wal-mart had spread into 9 states. By 1979 Wal-Mart was the fastest store to reach a billion dollars in sales. In 2005 Wal-Mart has 3,800 domestic stores along with 3,800 stores internationally, and had made over 312 billion dollars. As you can see the Wal-Mart empire has grown monumentally. To move into this segment of the market would be tough.

Both Walmart and Aldi should be worried about each other because both have distinct advantages over each other in bringing in customers. Aldi advantage is that its stores provide the lowest price in town with their products being on average 15-20% cheaper than Wal-Mart (pg 3). How it does this is by cutting costs and offering its products at the lowest possible price. This practice of cutting cost is best summed up by the Aldi motto “"When you buy a can of peas at Aldi, you're paying almost

Ensuring the customers pass through metal gates and only exit through the check-out is a core competency of the retail chain, this ensure that the movements within the store are easily monitored and all goods leaving the store pass through the check-out hence lowering incidences of pilferage. At the same time making sure that the staff is sufficiently trained in order to offer satisfactory service to the clientele is a major competency of the ALDI chain. They can also be said using the principles of lean production to leverage their efficiency and it also a competence of ALDI. Their principles are: continuous improvement of their products, which details the vital by employees to constantly contribute to quality of their service improvement.

Grocery industry is a highly competitive market with thin profit margins. Super markets are dominant players in the grocery industry. They use grocery offerings to drive traffic to their higher profit margin retail items. With its operations efficiency, Walmart, the largest grocery retailer has been able to offer significant price drops. This also forces other grocery stores to drop prices which keeps the profit margin thin. Even with all the advantages of operational efficiency and economies of scale, Walmart’s share in grocery sales was down at 51% in 2011.

Threat of Substitutes: Few substitutes such as bars for hard liquor, restaurant for food, etc. The threat is low because product sold depends upon customers taste and preference and there is minimal product differentiation.

The grocery retail industry worldwide has grown in recent years to become one of the most intensely competitive industries due to the continuous amounts of new entrants. A grocery retailer is one that sells food and other general household items. Hypermarkets, supermarkets, discounters and small grocery retailers are all under the grocery retail umbrella. Between 2003 and 2008, the grocery retailing industry accounted for 45% of store-based retail values sales over the world. The figures