How Aldi Keeps Prices Low

Low prices and high quality products are Aldi’s hallmark, and continued price cuts are planned through summer.

With 250 items slated for markdowns, Aldi promises customers savings of $100 million.  Simplicity, efficiency, and a consistent experience for customers help drive Aldi’s success.

Video Spotlight:  

This post is based on the Food and Wine article, Aldi announces major discounts on 250 popular items this summer, saving shoppers $100 million, by Marnie Shure, May 3, 2024, and the YouTube video in the Spotlight. Image source: Sean Pavone/Shutterstock

Discussion Questions:

1. What operations strategies are particularly important at Aldi?

Guidance: Often times businesses must choose between lower costs and high quality, but at Aldi, it’s not “either/or.”  Aldi manages to do both by opting to sell products with good quality, saving money in other areas of the business and passing these savings along to its customers.

Aldi’s customers expect low prices and meaningful discounts, but they also perceive that they are not sacrificing quality to get these.  This is because the design of the stores makes it clear to shoppers that Aldi is achieving the low prices from efficiency and a “no frills” approach rather than by cutting corners on the quality of its products.

2. How do Aldi’s operations support this rather unusual pairing of strategies?

Guidance: Aldi supports its low cost/good quality strategies by saving money with store design, service design, and product selection.

Store design:  At 12,000 square feet, Aldi is about one-quarter of the size of a typical grocery store.  The smaller footprint helps it save money on the building, utilities, and upkeep costs.  The size also means employees don’t have to walk as far to carry out their tasks, saving steps.  Finally, Aldi doesn’t waste money paying licensing fees to play music in the stores.

Service design:  Aldi may only have three to five employees on the store floor, so it is careful about how it uses them. Rather than having employees stacking produce, fruits and vegetables are displayed in their shipping boxes as is the rest of the merchandise.  Also, employees aren’t paid to round up carts in the parking lot, because the quarter deposit encourages most customers to return the cart and get the quarter back. In addition, Aldi doesn’t offer special services like a customer service desk or a bakery or butcher shop.  Aldi employees are used for key functions like restocking and ringing up customers.

Product selection:  Whereas a typical grocery store may carry as many as 31,000 items, Aldi only stocks about 1600.  This is important since the store is smaller, but it also means that purchasing and inventory management are much more streamlined.  Aldi can negotiate large contracts for just a handful of items in each product category.  Also, Aldi relies heavily on private labels to offer products that look very similar to the big name brands, so customers perceive that these are about the same as the more expensive options.  However, since they are private label, the prices are significantly lower.

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