Reference no: EM13937822

ALDI'S PRICING APPROACH

Aldi entered the market with an introduction of new National Pricing Policy focusing mainly on the cost leadership approach of being the cheapest in grocery among its competitors. Apart from being the cheapest in the industry they also offer products of the quality comparable to major retailers in the industry. It's this distinctive retailing approach has given Aldi a place in the marketplace with a competitive advantage.

Aldi has focused mainly on four approaches which has proved it to be a leader in the retailing industry.

1. National Pricing strategy: This strategy provides price equity and same benefits for all its customers by providing the everyday low pricing model, consistent in all its stores throughout Australia.

2. Unit pricing: This provides the actual cost of the groceries which allows the customers to buy the products at the best price. Aldi was the 1st supermarket to introduce unit pricing in all its stores.

3. Private Labels: Like other major retailing stores, Aldi also provide private labelled products, thereby reducing the marketing costs and selling that products at a cheaper price.

4. Aldi's creative 'Like Brands' and 'Swap and Save' advertising effort are enhancing brand perception and helping Aldi achieve its marketing objectives. This campaign has helped making loyal customers which has expanded Aldi's sales per store by +100% over 3 years.

Cost Leadership Strategy:

ALDI's strategy is focused on reducing the operational costs in running the grocery stores. Few of the examples of implementation of cost leadership strategy used by ALDI stores are:

• Aldi stocks only 700 products as compared to other supermarkets which stock up to 25,000 to 30,000 products. This helps cutting down the major maintenance and labour costs.

• Fewer employees are recruited as compared to other super markets.

• Aldi buys low price land mostly on city outskirts, builds cheap warehouse, employs tiny staff and displays items on pallet rather than on shelves.

• Due to fewer products available ALDI stores are usually 1200 square/meters in size while the biggest Coles super market is around 5000 square/meters. The small size makes it cheaper.

• Aldi encourages customers to bring their own shopping bags and charges for the purchase new shopping bag.

• Unnecessary cost is always avoided. For instance Theo Albrecht, one of the co-founded of Aldi switched off the light when there was enough daylight from outside and till now it is being followed. This might look to people as being stingy or miser. It's like saving a drop of water from tap but in corporate world every drops count. In this it's fine to stingy rather than on quality which they are not.

Operational Excellence:

According to Treacy and Wiersema research (1995), In order to maintain maximum operational efficiency, a company needs to use operational excellence strategy. Aldi's strategy to maintain good turnover rates are:

• Capability of Inventory acquisition:
• Cross docking-logistics.
• Focuses Price-sensitive customer target market

What other factors according to you made Aldi or it's pricing policy identify a unique position within a competitive market?

Should Coles and Woolworths supermarkets be worried with Aldi's gaining popularity?