Aldi: A Low-Cost Retail Giant's Distinctive Business Practices

            
 
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Case Details:

Case Code : BSTR252
Case Length : 16 Pages
Period : 1945-2006
Pub Date : 2007
Teaching Note :Not Available
Organization : Aldi
Themes: Business Strategy
Industry : Retail
Countries : Germany

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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The Land of the Hard Discounter Contd...

The grocery retail market was dominated by companies which offered a limited assortment of products at extremely low prices. Besides, unlike in other developed markets, there was reportedly no social stigma attached to shopping at discount stores in Germany (Refer to Exhibit II for a note on retailing in Germany).

Aldi was among the oldest retailers in Germany, and was considered to be one of the pioneers of the hard discounter concept. According to a survey conducted in 2004 by GfK, a German market research company, Aldi was the third most respected brand in Germany, behind Siemens AG and BMW AG.11

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Aldi was known for its 'no-frills' style of retailing, which offered customers low prices and nothing else. The company managed to keep prices low with a low cost business model that eliminated all unnecessary expenses and passed on the savings to the customers.

Background

Aldi was set up by Karl and Theo Albrecht (Karl and Theo) soon after the Second World War. The Albrecht siblings (born in 1920 and 1922 respectively) were sons of a miner, and lived in Schonebeck, a blue collar suburb in the Essen region of Germany. When Karl and Theo were children, their father contracted a lung disease, and quit his mining job to work in a bakery. Their mother maintained a small grocery store near their home to make ends meet. Karl and Theo attended middle school and then went into training, the former at a delicatessen and the latter at his mother's grocery store.

When the Second World War broke out in 1939, both the brothers were called up for military duty. After the war ended in 1945, they returned home to take over their mother's store. In the post-war years, the brothers expanded the business rapidly. In 1948, soon after the German currency reform, the Albrechts incorporated their grocery business as the Albrecht Discount Company. At this time, the company had 13 stores in the Ruhr Area of Germany.12...

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11] "The Next Wal-Mart?"BusinessWeek, April 26, 2004.

12] The Ruhr Area, also called Ruhr, (German Ruhrgebiet, colloquial Ruhrpott or Kohlenpott) is an urban area in North Rhine-Westphalia, Germany, consisting of a number of large formerly industrial cities bordered by the rivers Ruhr to the south, Rhine to the west, and Lippe to the north. (www.wikipedia.com)

 

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