In 1946, brothers Karl and Theo Albrecht took over a small store in a suburb of Essen, Germany, their mother had opened in 1913. Soon after they opened another retail outlet nearby and by 1950 owned 13 stores in the Ruhr Valley.
A priority for the Albrecht brothers was cost cutting: by the end of World War II, they had nearly perfected the philosophy of the “limited assortment” grocery store. The brothers did not advertise their business, did not sell fresh produce and kept their outlets small.
The brothers split the company in 1960s over a dispute about whether to sell cigarettes. By then, they had operated 300 shops and earned some DM 90 million per year. Two years after the split, which broke the chain into two legally and financially separate entities, they introduced the name Aldi. From then on, the Albrecht brothers’ business operated as Aldi Nord (Aldi North), which was known as Aldi Market, and Aldi Sud (Aldi South).
The companies continued to expand, Aldi Nord growing into 35 independent regional branches with about 2,500 stores, and Aldi Sud growing into 31 companies with 1,600 stores. In the 1970s and 80s, after the German reunification and the fall of Iron Curtain, Aldi expanded internationally, eventually operating some 8,210 individual stores worldwide. Both Aldi Nord and Aldi Sud operate markets mainly in Europe, but Aldi Sud also operates in the United States and Australia, among other locations.
In 1976, Aldi opened its first American store in Southeastern Iowa, continuing to use the Albrect philosophy: “When you buy a can of peas at Aldi, you’re paying almost entirely for the can of peas.” Aldi claims it saves customers money by leaving out the “army of stackers,” “piped-in music,” fancy display” and “gimmicks and games.”
In order to offer less expensive items, Aldi manufactures its products without the various factors — packaging, transportation, stocking, staff turnover and others — that tack pennies on to the final price consumers pay. To further reduce cost to the consumer, Aldi encourages customers to bring their own shopping bags, but also offers grocery bags for sale. To further reduce costs, Aldi’s shopping carts are available to rent for a quarter (deposit returned with the cart), thereby eliminating the need to pay an employee to recover carts. The store telephone numbers are unlisted to avoid needing an employee to answer the phone. Aldi’s labor costs are about 4 percent of store sales.
Aldi stores sell their own brand label foods, beverages and inexpensive household items, including electronics and appliances. It limits the number of outside brands it sells, usually to one or two per product, in order to increase sales and keep Aldi stores smaller than supermarkets that offer more diversity for a similar range of products. Aldi does not accept manufacturers’ coupons, although some stores in the U.S. experiment with a store coupon successfully.
Like some no frills, warehouse-style stores, Aldi does not decorate its aisles or fill all of its shelves. It offers pallets of its products, boxed in cardboard, which it places alongside aisles for customers to pick from.
The company maintained its policy of not advertising in Germany, with the exception of a weekly newsletter of special prices, because, it claims, the cost-saving measure can be passed down to consumers. In the U.S., Aldi advertises regularly through newspaper inserts and television commercials. Aldi is known to do its advertising in-house, so as not to spend money on an external advertising agency.
Although it had a reputation for being cheap and selling low-quality products, Aldi’s success hasn’t wavered. It continues to expand in Australia, England and the United States.
Headquarters: Batavia, Illinois
Number of Stores: 1,400 in the U.S., 8,500 worldwide
Number of Employees: 11,000
Annual Revenue: $68,700 million (U.S.)
Geography: Germany, Australia, Austria, Belgium, Denmark, France, Greece, Hungary, Ireland, Luxembourg, Netherlands, Poland, Portugal, Slovenia, Spain, Switzerland, United Kingdom, United States (36 states from Kansas to the East Coast)
Demography: Bargain hunters and do-it-yourself shoppers
Subsidiaries: Combi, Hofer
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