aldi-business-model

ALDI Business Model In A Nutshell

By the end of World War II, Theo and Karl Albrecht took over the small grocery store of their mother to make it become one of the most successful discount supermarket chains in the world. ALDI operates according to the  motto “the best quality at the lowest price.” With combined sales of 53 billion euros in 2010, ALDI North and South have separate operations. ALDI founders are among the wealthiest businessmen in Germany with a personal wealth of over 33 billion euros, combined. 

The ALDI origin story: the low-cost business model

In 1913, Frau Anna opened a small grocery store in the suburb of Essen, Germany. By the end of World War II, Karl and Theo, Anna’s soon took over their mother’s business, and run it with the motto “the best quality at the lowest price.” That motto would become the company’s vision for decades to come. 

By 1948, opening the two brothers had opened four stores in the local area. They managed to keep prices extremely low by only stocking non-perishable items and by selecting the things that sold the most from the shelves while removing the slow-sellers. 

By that time Theo and Karl Albrecht decided to focus on developing a chain of small stores. In 1954, the brothers opened Germany’s first self-service store. By 1960, Theo and Karl Albrecht owned 300 stores with an annual turnover of millions of dollars.

The split over a cigarette

In the 1950s the brothers split the chain into two separate groups, presumably over a dispute about whether to sell cigarettes. Theo headed Albrecht-Diskont Nord, which sold cigarettes. Karl instead became the CEO of Albrecht-Diskont Süd, which did not sell cigarettes.

Albrecht-Diskont store became ALDI

In 1962, despite the disagreement kept working together and changed the name of the. group to Aldi Nord and Aldi Süd. The taken from the first two letters of Albrecht and Diskont. The two businesses became financially and legally separate in 1966. By this time, there were 200 Aldi Süd stores in Germany.

The Trader’s Joes acquisition by Aldi Nord

In 1979, a trust headed by Aldi Nord’s Theo Albrecht bought the chain Trader Joe’s, which now operates 475 stores in the US.

How does Aldi keep its prices low?

Aldi uses a set of strategies to keep its prices low while maintaining a high quality:

  • Aldi lists 1,300 items in each store every day, which is very limited compared to other supermarket chains. That keeps waste to a minimum 
  • Aldi also stocks a lot of their own brands, with some becoming successful, which lowers the sales and marketing cost
  •  90% of the products are Aldi-exclusive brands, which makes it easy for the chain to market them, with more flexibility on. price and distribution
  • ALDI in a way retains a. self-service attitude, where customers bring their own bags or can buy reusable bags at the store. Also, they must bag their own groceries. This lower the costs of serving clients for the company compared to other chains
  • Limiting store hours and keeping their stores small (about 15,000-20,000 square feet)

ALDI North in numbers

aldi-north-group

Source: cr-aldinord.com

As reported by ALDI North official report:

The ALDI North Group is represented in nine European countries with companies as independent legal entities. In Germany, the ALDI North Group as a group of subsidiaries is comprised of legally independent regional companies, in each case with the legal form of a GmbH & Co. KG, which means that the managing directors of the independent regional companies have equal status in casting votes at regular board meetings. ALDI Einkauf GmbH & Co. oHG is engaged by these regional companies to provide various services. This company is also the licensor of the ALDI brand for the legally independent foreign companies of the ALDI North Group operating in the ALDI North Group countries. This arrangement ensures a uniform market profile.

The motto remains “offering high-quality groceries at everyday low prices.” 

aldi-north-sales-2016-2017

In 2017 ALDI North Group recorded sales for 23.4 billion euros, compared to 21.2 billion in 2016.

aldi-north-stores-and-employees

ALDI North has more than 69,000 employees.

products-and-own-brands-aldi-north

One of the secrets for ALDI’s business model success is to keep its price low is the own brand’s portfolio, which as. you can see spans anywhere from 73.6% in Poland, up to 96.1% in Belgium/Luxembourg.

ALDI North corporate responsibility program

ALDI North follows a corporate responsibility program, which comprises five main areas:

  • Employee appreciation.
  • Supply chain responsibility.
  • Resource conservation.
  • Social commitment.
  • Dialogue promotion.

Materiality-matrix-2017-ALDI-North-Group

ALDI’s founders are among the wealthiest businessmen in Germany

As reported on thelocal.de the top ten richest Germans are:

1. Karl Albrecht and family (Aldi Süd) €17.20 billion

2. Berthold and Theo Albrecht junior and family (Aldi Nord) €16 billion

3. Dieter Schwarz (Lidl, Kaufland) €11.50 billion

4. Otto family (Otto mail order) €9.00 billion

5. Susanne Klatten (BMW, Altana) €8.90 billion

6. Reimann family (Reckitt Benckiser, Coty) €8 billion

7. Reinhold family Würth (Würth) €7.20 billion

8. Günter and Daniela Herz (Germanischer Lloyd) €7 billion

8. Oetker family (Oetker) €7 billion

10. Rethmann family (Remondis) €6 billion

This makes the total personal wealth from ALDI founders at over 33 billion euros (about $38 billion at current rate).

ALDI as a private company

Aldi might well be among the largest private companies in the world. As a private company, ALDI has total control over its strategy without focusing on quarter results. Also, ALDI can keep its number relatively secret from its competition.

ALDI’s Related Case Studies

costco-business-model
With a substantial part of its business focused on selling merchandise at the low profit margin, Costco also has about fifty million members that each year guarantee to the company over $2.8 billion in steady income at high-profit margins. Costco uses a single-step distribution strategy to sell its inventory.

 

tesco-swot-analysis
Tesco was founded in 1919 by Jack Cohen, as a small group of market stalls. After rapid expansion in the following years, the company became the largest retailer in the UK and is now the second-largest in the world. To put their dominance into perspective, consider that Tesco serves around 66 shoppers per second across 7000 retails stores, delivering approximately $180,000 worth of sales every minute.

tesco-pestel-analysis

walmart-business-model
With over $495 in net sales as of January 2018, and over $4.5 billion coming from Membership and other income. The company operates three primary units that in 2018 comprise Walmart U.S. (approximately 64% of our net sales), Walmart International (about 24% of net sales), and Sam’s Club (approximately 12% of its net sales) a membership-only warehouse clubs and operates in 44 states in the U.S. and in Puerto Rico, as well as eCommerce.

 

walmart-vision-statement-mission-statement
Walmart’smission can be summarized as “helping people around the world save money and live better – anytime and anywhere – in retail stores and through eCommerce.” While its vision is to “make every day easier for busy families.” Walmart defines “busy families” as the bull’s eye of its business strategy.

 

walmart-swot-analysis
From humble beginnings just over 50 years ago, Walmart has grown to become the world’s largest retail company. A single small discount store in Arkansas has now expanded to over 11,000 stores in 28 countries. Some reports suggest that the company now makes $1.8 million of profit every hour.

 

how-does-amazon-make-money
Amazon has a diversified business model. Amazon’s primary revenue streams comprise its e-commerce platform, made of Amazon labeled products and Amazon third-party stores. In addition to that, Amazon makes money via third-party seller services (like fulfilled by Amazon), advertising on its platform, AWS cloud platform, and Prime membership.

 

amazon-subsidiaries
Amazon is a consumer e-commerce platform with a diversified business model spanning across e-commerce, cloud, advertising, streaming, and more. Over the years Amazon acquired several companies. Among its 12 subsidiaries, Amazon has AbeBooks.com, Audible, CamiXology, Fabric.com, IMDb, PillPack, Shopbop, Souq.com, Twitch, Whole Foods Market, Woot! and Zappos.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"

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