The grocery industry is one of the fiercest in terms of competition, with big-box chains like Walmart, Costco, Sam’s Club, and even Target taking on more traditional and regional grocery stores like Kroger or Wegmans.
Aldi is one of the fastest-growing grocery chains in the US, slated to rank as the third-largest grocer.
So, how does a company, with minuscule operations compared to Walmart, gain such an impressive foothold? Here are Aldi’s 9 competitive advantages explained!
Aldi’s Competitive Advantages (9 Factors)
1. Ultra-Low Prices
From its early days as a post-WWII grocery store in a war-shattered Germany, the Aldi model has emphasized pantry and grocery staples at the lowest possible prices, and this has never changed.
One has only to look at Aldi’s weekly ads to find meat, produce, cereals, dairy items, and more, for way less – sometimes half as much – as typical grocery stores.
Aldi makes this possible with their astonishing efficiency, which enables them to pass their savings onto the customer.
Longtime shoppers and new converts alike marvel at the amount of quality food and goods they can get while staying way under budget.
Even more impressive, Aldi’s incredibly low prices have had a marked effect on their competitors; Walmart, for example, has had to lower prices to stay competitive, and their US CEO has gone on the record saying that he “never underestimates” Aldi.
2. Astonishing Efficiency
The way Aldi achieves these ultra-low prices is by embracing the original efficiency model of the company’s founders.
It was Theo and Karl Albrecht who left goods in their shipping boxes on shelves and opted not to spend money on store decorations – and even improving on them.
Aldi has a number of practices, aimed at keeping costs low, that you won’t see in combination at any other store. This includes:
- Getting customers to “rent” their carts for a quarter and, in turn, incentivizing them to return them, while also removing the need for dedicated cart-gatherers
- Having customers bag their own groceries after check-out
- Having customers buy their bags, if they don’t bring their own from home
- Letting cashiers sit down – it’s actually not a comfort thing (employees have described the work at Aldi as “backbreaking”), but rather, the company found employees could scan faster if they were seated
- Lack of superfluous services, like check-cashing, selling stamps, selling money orders
- Cross-training employees to be able to perform almost every duty
- Stocking items on shelves in the shipping containers they get delivered in
- Lack of store displays
- Employing a limited number of people at each store
- Selling 90 percent private label items
- Keeping store sizes small, inventory limited, and even having limited store hours
- Putting multiple bar codes on every product
- Very little paid advertisement
Believe it or not, every single one of the items on this list contributes to the overall efficiency of Aldi stores, whether it shaves off precious seconds in the check-out lane or lowers the store’s utilities.
To learn more, you can see our related posts on why Aldi is so cheap.
3. Self-Administered Distribution Chain
Aldi boasts on its website of its “unique delivery system” which “simplifies the trucking process.”
Instead of relying on a third-party company to handle its distribution system, Aldi oversees operations itself, giving the chain more control over, and oversight of, the delivery of its goods.
4. High-Quality Food and Goods
People sometimes worry that because Aldi charges so much less for their food that it’s somehow subpar. This couldn’t be further from the truth. Aldi does not skimp on quality.
In fact, in the case of some items, what shoppers are buying is actually exactly the same as brand name label food (check out where Aldi’s milk comes from), just packaged under Aldi’s private labels.
Further, numerous fans, tasters, and testers have testified to the quality of Aldi’s produce, meat, snacks, frozen foods, and more.
One writer singled out Aldi’s organics and gluten-free offerings; another pointed out that PETA gave Aldi a “Top Grocer” Award for their vegetarian and vegan items.
These are items that are simultaneously more expensive and held to high-quality standards by shoppers traditionally.
5. Devoted Fan Base
The Facebook group has 1.3 million members and growing. No, it’s not the fan page for a pop star or actress; it’s the AldiNerd.com Community.
The combination of low prices, quality items, and a delightful panoply of rotating Aldi Finds has garnered Aldi a seriously cult-like following.
And these fans are talking, to friends and family, to strangers on social media, to their followers on blogs and devoted websites, and to anyone who will listen as they spread the good word about Aldi.
It’s an absolutely elite built-in word-of-mouth marketing machine.
See, for example, Aisle of Shame, an entire website devoted to Aldi, and so named after the middle aisle in stores, where the Aldi Finds are found.
One goes in for a gallon of milk and leaves with two types of cookies, a kettlebell, a dog hat, and a pervading sense of pocketbook guilt.
Then there’s Aldi Reviewer, which test drives food and goods so you have a good idea of what you’re getting into before you buy.
Or The Amazing Aldi Instagram account, which highlights all sorts of goodies in spontaneous-looking, yet well-lit photos.
It’s enough to whip up any casual browser into a shopping frenzy.
Oh, and it’s all completely free advertising for Aldi.
6. Partnership With Instacart
Aldi’s partnership with Instacart, the number one online grocery shopping app, made headlines back in 2018, and since then has yielded mostly positive reviews from fans.
Main competition Walmart offers its own pick-up and delivery service, but even Consumer Reports had to give Aldi Instacart the edge when it came to convenience.
Since a lot of shoppers value convenience and flexibility when it comes to managing schedules and tasks, that gives Aldi’s Instacart partnership a major advantage, even if customers are paying a little bit more online for the same types of items.
7. Product Innovation
Aldi is not a company that has attained a degree of success and now just rests on its laurels.
The hustle is real at Aldi HQ, where testers are always looking to expand on the Everyday and Aldi Finds items. (One lucky food blogger even got to participate in taste tests!)
This creates a balance between pantry staples that everyone uses – like flour, sugar, milk, eggs, etc. – and unique products, such as an extended selection of Burmans barbecue sauces or White Stilton Cheese with mango and ginger.
Additionally, Aldi listens to its customers when they give them feedback on new items.
Recently, their everything bagel seasoning, which started off as a limited-time Aldi Find, found its way back to shelves as an established Everyday item. And then Aldi released three new flavors, to boot!
8. Strategic Growth
Back in 2017, Aldi announced it was spending $5 billion to expand its presence and renovate current stores in the US, over the next five years.
With over 2,000 stores in the US, Aldi marches on in its expansion, focusing strategically on western states like California and Arizona (AZ has 11 Trader Joe’s stores; Aldi just opened its first four in AZ in 2020), as well as southerly states, like Louisiana and Alabama.
Aldi’s corporate website cites factors like “dense trade area population within three miles,” “sites located in the community and regional shopping districts” and “daily traffic count in excess of 20,000 vehicles per day” when considering new store locations.
And much like Walmart or Target, Aldi clearly has no qualms about opening new stores in new locations within the same cities.
9. Higher-Income Appeal
While Aldi aims to appeal to “anyone who eats food,” Produce Blue Book noted that Aldi recognizes its customer base is actually middle- to high-income shoppers (much like Trader Joe’s).
That might seem odd, considering the emphasis on low prices, but you can see it play out in the expansion of their selection of specialty items and items that cater to specific diets, like vegetarianism and veganism, gluten-free and organic.
Aldi has publicly eschewed synthetic colors in its foods and removed 125 unnatural ingredients from its organic line, another move sure to get the attention of high-income shoppers.
And this Aldi’s awareness of its target market is also visible in the selection of Aldi Finds, which often mimics (and even surpasses) fancy goods you’d find in a specialty boutique shop, like cheeses, cured meats, and olives.
Then there is the aforementioned renovation investment, which made stores brighter and more inviting, more, in my opinion, market-like versus the discount grocery store feel that even Walmarts can have.
While Aldi maintains its low prices and accessibility to all incomes, it continues to strategically appeal to higher earners, who can spend more per visit and regularly use the more expensive Instacart delivery option.
Now that you know about Aldi, you might also be interested in knowing about Walmart’s competitive advantages and Costco’s competitive advantages.
Additionally, don’t forget to see our in-depth posts on Aldi statistics where we cover more interesting findings about this beloved brand.
Aldi holds many of its cards close to the vest, including its exact financials, but the company’s competitive advantages over close rivals like Walmart and Trader Joe’s is unmistakable. If they keep doing what they’re doing, Aldi is undoubtedly headed toward the #3 Grocery Store in the US states.