Jan. 13, 2024
In the offline retail market, "price" has always been the lifeline of various brands.
The pricing strategy of ALDI can be summarized in one sentence: while ensuring product quality, we use extreme cost control to eliminate all unnecessary costs.
This approach has allowed ALDI to provide affordable products to its customers without compromising on quality. One of the key factors contributing to ALDI's success is its innovative packaging solutions, such as In-Mold Labeling (IML) for daily food packaging.
IML is a technique that involves placing labels directly into the mold during the injection molding process. This results in a seamless integration of the label with the packaging, providing a visually appealing and durable solution. ALDI has embraced IML for its daily food packaging, ensuring that their products stand out on the shelves while maintaining cost-effectiveness.
In addition to IML, ALDI has also implemented other packaging solutions like magic tubes for various products,such as ice cream tubs, yogurt cups,margarine tubs . Magic tubes are convenient and user-friendly containers that allow customers to dispense the desired amount of product easily. These tubes not only enhance the customer experience but also reduce waste, making them an eco-friendly choice.
ALDI's low price strategy extends beyond packaging solutions. The company has invested in plastic injection technology to manufacture its products efficiently. By utilizing this technology, ALDI can produce items in large quantities, reducing production costs and passing on the savings to customers.
ALDI will break down the entire production and sales process into four stages, starting from each stage to reduce all unnecessary costs.
· Purchase cost
The number of SKUs in general supermarkets ranges from 10000 to 15000, and the number of SKUs in Wal Mart can even reach 20000.
However, the number of SKUs for ALDI was initially controlled at 500-800, but in recent years, it has increased and usually does not exceed 2000, only 1/10 of the industry level.
The "quantity for price" strategy aims to significantly reduce SKUs, increase single product sales, and gain greater bargaining power from upstream suppliers.
ALDI has almost abandoned all store decoration to reduce the cost of building a store. Even the "shelves" have been omitted and replaced with products stacked directly in boxes. The upper half of the cardboard boxes are cut open for customers to pick up directly, saving both shelf costs and labor costs for organizing shelves.
Germany adopts a progressive tax rate, and the higher the company's revenue, the higher the tax rate. If a large conglomerate has multiple subsidiaries, the final tax rate will also be calculated based on the total revenue of the parent company.
For this reason, ALDI is willing to voluntarily give up "getting bigger". For example, in Germany, it has registered dozens of mutually equal "sister companies", thereby reducing the average tax base of enterprises.
The strengths of the Albrecht brothers in their way of life are that they actively choose to earn less, not so high profits, and give this portion of the price to consumers.
So, ALDI reduced the company's profit from 1 yuan to 50 cents.
In this way, ALDI products from ALDI are nearly 35% cheaper than regular supermarkets.
A streamlined and controlled number of SKUs will result in three outcomes.
Firstly, ALDI can only select the supplier with the highest cost-effectiveness in each category.
Secondly, each product of ALDI can have a larger shipment volume compared to similar supermarkets, thus having higher bargaining power with upstream suppliers.
Thirdly, streamlined SKUs can also reduce the operational and after-sales costs of the enterprise itself.
The success of ALDI’S hard discount model is the result of its continuous hard work and continuous improvement in both cost and business aspects.
This methodology may not be suitable for you, but the underlying business logic, which focuses on the essential needs of users, reduces losses, and offers good quality and affordable prices, will never change.