ALDI: The German Grocery Store Taking the US by Storm
The fastest growing grocery store in the United States isn’t an American company like Walmart, Albertson’s, or Kroger. Instead, the German discount grocery store Aldi has surged to the forefront of the American grocery market and is outgrowing everyone else.
And while other grocery stores are currently feeling the sting of widespread inflation in the economy, this same inflation has helped Aldi gain even more ground against its American competitors. As American shoppers look for relief from surging food prices, this has played directly into the strengths of Aldi’s business and has only made the -company stronger. Aldi’s relentless pursuit of efficiency is what allows them to charge significantly less for the same food items you would find at other stores.
Aldi is able to run an incredibly streamlined and cost efficient business which allows them to pass on their own cost savings to their customers in the form of lower food prices. From the moment you enter an Aldi parking lot, you begin to see these efficiencies at work. You’ll immediately notice that Aldi stores are a lot smaller than most other American grocery stores and are just a fraction of the size. By operating in a smaller space, Aldi is able to save lots of money on the building lease and the utilities required to keep the building running. And a smaller space means that Aldi doesn’t need to hire many employees to manage each individual store.
When you enter Aldi, you’ll also immediately notice that the store has a much smaller selection of items. Aldi carries about 1,400 items in its stores – while most grocery stores carry 40,000 items. This is another deliberate choice Aldi makes as well to increase its efficiency and lower prices. By carrying a small selection of only very popular items, Aldi is able to concentrate its buying power and buy these items in bulk at a cheaper price from its suppliers. While other grocery stores will buy smaller amounts of lots of different items, Aldi buys larger amounts of a smaller number of items. Because of this, they are able to get significant bulk discounts from their suppliers which allows them to then turn around and sell the items to their shoppers at a lower price than most other stores can.
Aldi also is also laser focused on ensuring the checkout process is efficient and streamlined. The company prints larger barcodes and often puts them on multiple sides on its products. This allows cashiers to check out items for customers much quicker. By increasing the efficiency of the cashiers and the check out process, Aldi doesn’t need to hire as many cashiers total which further reduces costs. As part of this streamlining process, Aldi cashiers don’t bag groceries themselves. Instead the cashier will place all the items directly in a cart next to them and then once they have paid for the items, the customers is then expected to wheel the cart away and bag their groceries themselves in a separate section in the front of the store.
But perhaps the biggest key to Aldi’s efficiency and pricing success is its focus on private label products. Approximately 90% of the packaged goods Aldi sells are private label products that are Aldi’s own store brand. These store brand products are significantly cheaper than name brand products because the company doesn’t spend any money on brand marketing. While name brands like Cheerios will have a marketing budget to advertise on TV and other places, store brands like Aldis invest nothing in marketing and other related costs. This allows them to charge significantly less than a name brand does . With people suffering from inflation and higher food prices, many food shoppers are buying more private label store brand products than ever before. In fact, it was found in late 2023 that 54% of consumers said they plan to continue buying cheaper store brand products as opposed to national name brands. With Aldi having such a strong focus on private label store brands, this trend among shoppers plays directly into the company’s strengths.
This relentless dedication to efficiency has made Aldi significantly cheaper than other grocery stores. Time and time again independent studies have found Aldi to be a significantly cheaper grocery store than the competition. These savings can be particularly drastic with certain staple household items like bread and eggs. For these reasons, Aldi is growing exponentially and is the fastest growing grocery store in the United States. The company is already the third largest in the country by store count and it has no signs of slowing down. The company plans to add 800 more stores by 2028 which should boost the company’s total store count to around 3,200 locations in the U.S. And with Aldi more popular than ever among shoppers, this trend could continue for the foreseeable future.
If you enjoyed this video, also check out my video on why Walmart failed in Germany: • Why Walmart Failed Miserably in Germany
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