By Kathie Canning
Through a special arrangement, presented here for discussion is an excerpt of a current article from Private Label Buyer.
In these scary days of retail, where bankruptcies and store closings seem to occur on a daily basis, a success story has the power to intrigue and amaze us. And one particularly intriguing success story is that of Batavia, Ill.-based Aldi Inc., a retailer that, steadily and quietly, has been winning over a growing base of value-minded U.S. consumers.
Aldi Inc., PL Buyer's 2009 Retailer of the Year, is part of the Aldi Süd division of the German Aldi company, but operates independently.
Today, Aldi boasts approximately 1,000 stores in 29 states. Although its locations still rely on a "no frills" approach - products are displayed within their cardboard shippers; shoppers must supply or buy bags and pay a 25-cent (refundable) deposit to free up a cart - Aldi now offers more than 1,400 regularly stocked items. And 95 percent of those products are Aldi's own items, presented under 118 select brand names.
Expansion remains a critical element on the Aldi agenda. It opened more than 100 stores in 2008, plans at least 75 more openings in 2009, and will enter into Texas in 2010. Its newest stores sport a pleasant pastel décor and higher ceilings that let in more natural light.
"Aldi today is opening in more attractive facilities in higher-income areas," noted David Livingston, principal of DJL Research. "They have evolved from catering to low-income groups [to catering] to all income groups."
What's more, Aldi's new products continue to skew more upscale and innovative. Case in point: The retailer recently entered into the premium skin-care market with the introduction of its Lacura brand, an award-winning product line with European Aldi roots. And this year, Aldi's Fit & Active brand became the first private label brand to include guideline daily amounts (GDAs) on product packaging.
"The Aldi shopping experience continues to evolve positively," stressed Jim Hertel, a managing partner with Willard Bishop. "They have long been operationally focused as a core part of being able to deliver such great consumer values - reduced SKU counts, low in-store labor levels, cut-case/pallet merchandising, etc. - but seem to be taking the shopping experience much more into account."
Doron Levy, president of Captus Business Consulting, believes Aldi's product quality has only improved through the years, and that the retailer's implementation of its special purchase program also has done much to grow business with new customers.
"U.S. consumers are in value mode, and they are ready to jump on private label, as most of the quality stigma has diminished," Mr. Levy said. "Aldi's presentation and layout give its brands a shine that other stores are missing. ... Product branding and labeling is really on par with, and in some cases, exceeds name brand standards."
Discussion Questions: Why has Aldi been so successful? What has most impressed you about its evolution over the years? What challenges do you see to its continued expansion?