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'Our advertisement is the cheap price'

July 28, 2014Written by Tom Ryan

That sounds like a slogan from Sam Walton, but it's from the recently deceased Karl Albrecht, co-founder of Aldi. Unfortunately, the remark, made in 1953, was reportedly one of the few made by Mr. Albrecht.

He and his younger brother and co-founder, Theo, who died in 2010, were renowned for their reclusiveness, which some attributed partly to a kidnapping of Theo in 1971. With little inkling from the brothers around Aldi's approach, many obits on the loss of Mr. Albrecht speculated a bit on how the brothers built the world's seventh largest retailer in the world.

Much like Walmart, Aldi was long obsessed with low prices. But the concept delivered the discount formula with many quirky practices—largely designed to reduce labor and expenses—that are still not widely used across retail today. The concept is often compared with but still stands apart from Trader Joe's, which Aldi acquired in 1979.

Here are five unique attributes:

No frills atmosphere: The stores feature no alluring images or bright lighting. Items are displayed on open carton displays on pallets for easy stocking for the employees. There's no music. Shoppers pay a quarter for a shopping cart, which they receive back upon return. Plastic or paper bags aren't free. Customers bag their groceries. Credit cards aren't accepted. There's no loyalty program or coupons.

Limited-selection: The smaller format stores sell no more than 2,000 of the most frequently purchased grocery and household items. Besides focusing on best sellers, providing only one (or two) options for toothpaste or coffee drives buying scale and delivers inventory efficiencies.

Private labels: About 95 percent of its mix is private label. But Aldi also openly states its exclusive products "must meet or exceed the national name brands on taste and quality." Beyond rigorous testing of products, Aldi offers a Double Guarantee: if not 100-percent satisfied, Aldi replaces the product and refunds the purchase price.

Minimal advertising: Aldi doesn't send out its circulars in newspapers and does limited TV advertising. A unique twist is Aldi sends out its circular two weeks in advance every Wednesday. The upcoming week's ad is posted on store windows.

Special Buys: A section in the middle of the store offers limited time deals that include food but also housewares, electronics and sports equipment that other grocers don't offer.

While also known for above average industry wages, only being open during peak shopping hours and locating stores in remote areas are also among the ways Aldi keeps costs down.

According to Aldi's statement, Karl Albrecht "was convinced that customers with a very limited income should also be able to eat and drink quality food. He saw this as his calling."

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