Case Study for Aldi Supermarket

I. Background

Aldi supermarket is known as a company that implements lowest commissions. Over 10,500
stores worldwide and 1,300 store in US states also Aldi is expected to expand its US reach by 50%. Aldi
supermarket owns Trader Joe, one of the successful merchants and also have a long history of
international expansion. Trader Joe’s strategy is competing with other retailers like whole foods.

However, Aldi's basic strategy is straightforward, it is to provide acceptable quality at low rates.
Its selection is nearly exclusively made up of private-label products, which are priced 20–40% lower than
popular brand-name products. Despite this, Aldi generates much bigger profits than food and grocery
companies with higher price points. The reason why is because of lower costs, capital management and
higher efficiency.

Aside from that what makes Aldi supermarket standout is that, Aldi's inventory turnover is
nearly three times that of a regular supermarket. To put it another way, commodities in their system
spend far less time in warehouses or on retail shelves. Aldi receives funds immediately, but pays
suppliers later, and invests the "float" to generate short-term interest. Taking all of these considerations
into account, Aldi employs a high-risk, low-price strategy that routinely outperforms the rest of the
industry.

II. Statement of the Problem

a. What type of price strategy/positioning is being employed by Aldi based on the case study?

The type of pricing strategy being employed by Aldi Supermarket according to the presented
case study is low-price strategy, in which significantly gave them higher returns than traditional
supermarket chains who commanded higher price positions.

b. What is/are the factor/s that contribute/s to success of the company using its price positioning
strategy?

Aldi Supermarket competes with other competitors in the market by simply offering an
acceptable level of quality with an acceptable but competitive price. The varieties of their products
consist of almost entirely of private-labeled items of which the prices are lower than credible or well-
 known brands ranging from 20 to 40%. Be that as it may; Aldi Supermarket achieves significantly stellar
returns than other food and grocery chain who implies higher price positions.

c. How can the company achieve success by using a different price positioning strategy?

Though as competitive and stable as they already are, Aldi Supermarket might become more
successful if they are to use a different price positioning strategy aside from their existing one. Although
having their current strategy, which is according to the case, provide them guaranteed consistent
product quality, is extremely efficient, feasible for their market, and enables them to focus both on sales
and advertisement; having to use other strategy might light more opportunities for them to achieve the
peak of their success.

III. Areas of Consideration

Aldi Supermarket achieves significantly higher returns than food and grocery chains who
command higher price positions because compared to their competitors that offers higher price, Aldi
provides an acceptable level of quality at a very competitive price – as what their core strategy is. We
could also see that they began with this strategy from day one, and through it they became extremely
efficient and have provided a guaranteed consistent product quality.

In addition to the answers on the second statement of the problem, there are three (3) factors
why Aldi’s returns on sales are more than double the returns compared to a traditional supermarket:

 Higher efficiency, lower costs, and capital management

 Gross return per sq m of floor spaces is more or less 31% higher in Aldi than a credible
supermarket
 Personnel cost or labor cost save Aldi the equivalent of 8.2% of sales simply by putting bar codes
on sides of products thus lessening the inconvenience of searching for the code of each product
and speeding up the cashier’s process of punching in the prices.

Moreover, Aldi Supermarket gets its money faster and pays its supplier later on. The move in
which Aldi Supermarket invest the “float” to earn short term interest contributes to the pricing strategy
because in that way the company was able to execute their goal which is to give low rates for their
products.

IV. Alternative Courses of Action

 With all the data presented about Aldi Supermarket, the following are other possible price
positioning strategy that they can choose from to achieve success:

 High Price Strategy – This pricing strategy involves the pricing of a product or service that are
higher but is not on a prestige price level. The companies with high price strategy derives their
competitive advantages from the high value of their offers. Though unlike premium strategy,
high pricing position does not put products into a limited volume and it can be acquired by
anyone in their market, only that its quality is higher than those offered with low pricing.
Compared to Aldi’s current strategy, this may help them into increasing more of their profit. It
would allow them to offer products with larger significance to their end-users and could
maintain high and very consistent quality level. Disadvantages, however, can be in terms of how
Aldi how could handle their discounts, promotions, and special offers without endangering the
price position of their products.
 Premium Price Strategy – This pricing strategy involves pricing a product higher than its normal
or standard market value which determines that the product being sold is of high quality and is
more valuable than others with similar offering. Having this kind of strategy also proves that the
company delivers their products and services with an optimum level of performance. Being said
that this strategy drives its consumer to think that the company can offer the highest quality of
their products and services, hence having that prestige pricing, is an advantage for it may
increase their profit. However, compared to Aldi’s current strategy, this might be a little too
much and might even decrease the number of their market. Another disadvantage is that Aldi
Supermarket then might have to offer only limited volume and market shares, as well as the
inability to offer discounts and special offers – which they are actually known for.
V. Recommendation

Based on the findings and conclusions that have been presented, the group suggests the use of
the High Price Strategy as the best alternative pricing strategy for Aldi Supermarket. As per Aldi’s current
strategy, the profit they get is lower compared to the money they spend. Despite the company is still
operational, there is a financial shortage when it comes to profit. A high price strategy involves the
pricing of a product or a service that is higher but is not on a prestige price level. This strategy would
allow Aldi to gain bigger profits and offer products with larger significance to their end-users all while
maintaining a high and very consistent quality level.
VI. Problem Solving

Individual Excel File – Submitted Individually

VII. Management Lessons Learned

Aldi's price strategy, according to the study, is low price strategy. This strategy helped Aldi to
outperform the rest of the industry where their business belongs to. Low price strategy is still a risky
move in some ways but if an organization performs this strategy effectively, like how Aldi did it, it can
help the business grow and can also help the company to dominate the market. Choosing the right
pricing strategy is a very important part of a business because first of all, price and quality is what the
consumers often look for. If the price is reasonable and the quality of the product is good and is right for
its value, the company will gain a good market, in which in return would as well contribute to good
sales. It may also build a good reputation for the company based on the consumers’ good feedback.
Choosing the right type of price positioning helps businesses a lot because it gives the product/s or
service/s being offered a unique selling proposition, market value, and makes it stand out from its
competitors.