Whether an enterprise supplies goods or services to the elite or the masses, the leaders have to set themselves the question: “Could these cheap businesses be a threat regularly in the long term?” The majority of managers have said: “No”. They believe that if a business selling at the price lower than the necessary level, then sooner or later, they will go into bankruptcy. Then they cite the case of U.S. Airlines beat the cheap airline companies such as People Express in the ’80s.
However, managers forget that after all those things, the low-cost carriers continue to grow. With large investments, low-cost businesses also know to excise cumbersome procedures. The “warrior” in competition on prices is ahead of larger competitors in many ways such as they only focus on one or several products or services, providing basic products or services increased significantly more benefits than their rivals and minimizing daily operating costs and so on.
A typical example of a successful low-price firm is Aldi.
According to Chung (2015), he states that “ALDI is stealing customers as they increasingly prioritise value over fresh food”. From a survey of more than 1500 consumers, most of shoppers ranked “offers good value for money” as one of the most important factors. It was account for 39 % in 2013 and up to 44 % in the next two years.
ALDI’s secret Success
ALDI’s secret of success is “very high quality and very low price.” This business method aimed at a very specific psychological customers in a period. “We want consumers can buy the food items and the most important staple food in most places nearby, always fresh, always with high quality and always pay with the lowest prices”,the sentence on the so-called “principle of ALDI” by Karl and Albrecht, two fathers of Aldi. It can be seen here, things that Albrecht brothers is interested in not only convenience and cheap prices, but also customer psychology. They won’t shame, or hesitate when shopping in the supermarket of ALDI. The cheap goods is poor quality and outdated to lower prices and sell off
To succeed with this new business method, ALDI has to sell more goods and maximize cost savings.Therefore, according Thetimes100, ALDI thoroughly implement a number of efficiency concepts, such as:
- Continuous improvement – an organizational culture where all employees are dedicatedly working towards improving the quality of the products each day.
- Just-in-time production – stock is received only when required as storing stock more than required is expensive
- Time based management – The objective of this approach is to cut down on time taken for business processes. It can be achieved by proper planning, having a multi skilled and flexible workforce.
- Total quality management (TQM) – a quality assurance approach where all workers share the responsibility for getting the job done ‘right first time’.
ALDI supermarkets believe in maintaining a simple ambience which costs less. They do not have too much of furniture and they are not much decorated, they have simple and basic shelves, the goods are in containers and signboards are used if only required. ALDI’s don’t have huge products as they prefer focussing on daily consumer goods. They also manage to save on appliances like refrigerators and air conditioners and also save on advertising.
This below video will show Aldi Tour and the Layout of Aldi:
ALDI’s motto is ‘price is the best advertising’ and therefore they keep low prices for their products rather than marking it down. According to Consumer Pulse Survey of CHOICE(Clemons 2015), Aldi is considered as the cheapest retail supermarket in Australia, compared to other competitors such as Coles or Woolworths
On the survey, the average price of a basket of Aldi selling across Australia is $ 87.68, while the price of these items is $ 174 at Coles and $ 176.77 Woolworths , not including the discount price
Furthermore, Aldi’s employees are trained to substitute for each other when someone is busy with another work. This approach is known as ‘special ALDI style’.
Published by:Tung Nguyen
Chung, F 2015, “Customers flocking to Aldi for value, fresh food appeal going stale: Morgan Stanley”, Retail, Retrieved 2rd May, http://www.news.com.au/finance/business/retail/customers-flocking-to-aldi-for-value-fresh-food-appeal-going-stale-morgan-stanley/news-story/f8fb58df8885d049d65fa59a4d91e28f
Thetimes100, n.d,” Competitive advantage through efficiency”, Aldi, Retrieved 2rd May, http://businesscasestudies.co.uk/aldi/competitive-advantage-through-efficiency/
Clemons,R 2015, “Which supermarket has the cheapest groceries?”, Cheapest Groceries Australia, Retrieved 2rd May, https://www.choice.com.au/shopping/everyday-shopping/supermarkets/articles/cheapest-groceries-australia#jargon