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Aldi-A German Retailing Icon
Ananth G (1111008)Divya RM (1111026)Naveen R (1111042)Parasuraman A (1111047)Sagar Behera (1111058)
Aldi- Albrecht Discount Stores
Focus on the indispensable and avoid
the unnecessary
4 aisles, three-to-
seven persons, 700
SKUs
44 Billion USD;Aldi Nord and Aldi
Sud
Product assortment
Items were available in only one standardized
size
Absolutely no frills
No complicated methods to set price; No complicated engineering for logisticsNo customer survey; No product placement
Simplicity, Frugality, High
Quality and Confidentiality
Aldi
Aldi Nord
Cell………. Cell
Aldi Sud
Cell………. Cell
60 Cells
4000 Store
Aldi- Germany
Aldi Store (~1000 sq. M)
Receiving Docks
Store room (20% of store area)
Selling Area
Distribution Center: 1 per Cell (60 stores on avg. )~25000-40000 sq. M20 reception and shipping docks
Selling Area
Fleet of 25 or more trucks
Branded Products Aldi Products
5% 95%
Frozen Food (5%)
Baked Food (1%)
Dry Goods (81%)
Refri. Goods(10%)
Aldi: Distribution Channel
Creating Value• Quality Testing –
Legal Requirements in Germany• Intense laboratory
tests on eggs• Tasting awards for
beers• “No frill” efficient
Operations leading to cost savings
Delivering Value• “No question
returns” policy• Faster checkout
rate• 42 items per min
• Store Locations• Average cost of SKU
– 1.47 euro• Lowest price • Area specific
products
Communicating Value• Brand Image of
“EDLP”• In store advertising
with fliers • Out-of store
advertising for new locations only
• Surprise Buys
Capturing Value• High Quality Private
labels at very low cost
• Loyal customer Base• ALDI themed
parties • Simplified Decision
Making
Value Delivery Chain
• Employees need to memorize bar codes for all products• 4 bar codes on a single product (specified size-supplier’s responsibility)• High Efficiency - 42 items per minute
Decrease check out time
• Truck fork lift system – 3 pallets simultaneously• DC with reloaders – separates 40 large pallets into 80 small pallets every
hour
Distribution Centers
• Supplier ships products in “open boxes”- goods in a single pallet prepared for sale within 3 minutes
• Stringent box dimension requirements on suppliers-placed in refrigerator without unpacking
Supplier Specifications
Time Efficiency
• Aldi dictates prices for all SKUs• SKU count-700; “every additional item certainly causes
increased expenditure”
Product Selection
• Very low advertisement and marketing expenditures• No marketing/strategy departments; management
consultingStrategy
• Lesser employees (3-7 employees per store)– More pay• Personnel costs: 3% of sales vs. 9% indus. avg. • Employees trained to eliminate wastes• No separate employees for unloading
Employees
Cost Saving mechanisms
• Entered into long-term pricing agreements with Suppliers
• In bound logistics on “freight paid basis” from the supplier
• Punctual payments – Opportunity for better margins
Supplier
• No in store decorations• No security cameras• “One telephone for one store” – communication to
DCs only
Store Operations
• Low inventory - Inventory holding time at DC – less
than 24 hours (cross-loaded into outbound trucks)Distribution
Centers
Cost Saving mechanisms
• Retreaded tyres and wind deflectors for the truck fleetLogistics
• Store locations – low cost districts – 2% of total sales on occupancy cost
• Largest property owner in Germany – very low number of rented stores
Store Locations
• Cash/Debit cards – No credit cards for payments
• Shrinkage: 0.5 % of sales vs. 1.7 % of indus
In direct cost saving
Cost Saving mechanisms
Aldi Vs Competitors
Aldi Walmart
Format Strategy Limited assortment Multiple available
Price StrategyEDLP- 6.6 % lower than
Walmart on AverageEDLP- Costlier than Aldi
Cultural fitness Culturally embodied; Cultural clash and stubborn to
adapt
Product ProcurementEffective procurement
from local suppliersCentralized procurement center;
ineffecient
Legal constraintsModel designed as per
German regulations
Regulations prevented regular Walmart strategy; No big stores;
Price Discount
Aldi Vs Competitors
Aldi Walmart
Stores7200 Stores in 15
Countries5700 Stores in USA
SKUs 700 70,000
Revenue USD 44 Billion USD 285 Billion
Net Income USD 2.1 Billion USD 10.5 Billion
Employees per Store Three-to-seven employees 500 Employees
Percentage of Private Labels
90% 20%
Discount in Price 20 to 30% 12%
Particulars ALDIConventional Supermarkets
No. of Aisles 4 10 to 20
Staff personnel 3-7 30 staff
No. of SKUsAldi North-700Aldi South-900
15,000 or more SKUs
Sales per km 8650 Euros 3960 Euros
Shrinkage Loss 0.5% 1.7%
How Aldi Fared?
Thank You