What is Aldi doing right?

[401don]

I do find it a bit odd that they are doing so well. They focus on packaged goods, sales of which have generally been on the decline in recent years. Canned soups and vegetables, etc. are not very healthy and people who can afford to, often try to buy fresh these days. They are less expensive for these items but are they really much cheaper than the no name brands available at regular grocery stores? Maybe some people can't be bothered looking for sale items. It appears they fill a niche, locating in lower income areas that don't have a Costco nearby or people don't want to buy a membership.

[Canadian Visitor]

I do find it a bit odd that they are doing so well. They focus on packaged goods, sales of which have generally been on the decline in recent years. Canned soups and vegetables, etc. are not very healthy and people who can afford to, often try to buy fresh these days. They are less expensive for these items but are they really much cheaper than the no name brands available at regular grocery stores? Maybe some people can't be bothered looking for sale items. It appears they fill a niche, locating in lower income areas that don't have a Costco nearby or people don't want to buy a membership.

I think something to keep in mind, in the U.S. context is that the hard discount segment of the grocery sector is less developed than in Canada.

In Canada virtually every major chain group has a hard discount brand [[ Loblaws - No Frills, Sobeys - Freshco, Metro -Food Basics etc.)

The keys to the segment, other than less elaborate store decor, and fewer service counters, are less selection, lower rent locations, and more focus on store brands.

In doing all of the above, you are able to offer a lower overall price point on what you're selling.

In the case of Aldi, in particular, they are also much smaller format. So for people who despise wandering around a Costco or Walmart for an hour just to get that quart of milk that's 3 blocks into the store; Aldi is much more compact, often as little as 10,000ft2, and you can get in/out much faster.

Of course they also have some niche offerings, like Trader Joes and others, playing to their strengths. ie. You'll tend to see more German/East European product offerings than you might at another chain grocer.

This is an interesting video on Aldi in the U.S. vs Aldi in Germany by a German living in the Cincinnati area w/her American boyfriend.

https://www.youtube.com/watch?v=wEJ1nyIoVNs

[JBMcB]

There was one by our old house, and the nearest one to our new house is still the old one, so it's a little inconvenient to shop there.

In general, they have lower prices on most name-brand things, and their house-brands tend to be about the same quality at a lower price point than the name brands. The produce, at the one we went to at least, was pretty bad, and their meat selection was just OK.

They use warehouse club tactics to save money. They don't bother unboxing stuff, they wheel it out in the shipping cartons and tear off the top and side so you can get at it. They have an ingenious quarter-deposit system to make you bring the cart back to the store so they don't need cart attendants. The end results of all this is they don't need to employ as many workers, which keeps costs low.

I'm not sure how many more stores they are opening in Michigan, but a big part of their recent expansion is the purchase of the entire Winn-Dixie chain, which is mostly in the southern states.