Aldi

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ICMR Case Collection
Icfai Center for Management Research

Aldi: A Low-Cost Retail Giant’s Distinctive
Business Practices
BSTR252
This case was written by Shirisha Regani and under the direction of S.S. George, Icfai Center for Management Research (ICMR). It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.

For use by students of Icfai Flexible Learning programs.
Not to be reproduced or distributed in any form or by any means

 2007, The Icfai Center for Management Research. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means- electronic or mechanical, without permission. To order copies, call +91-40-2343-0462/63 or write to Icfai Center for Management Research, Plot # 49, Nagarjuna Hills, Hyderabad 500 082, India or email icmr@icfai.org. Website: www.icmrindia.org

BSTR/252

Aldi: A Low-Cost Retail Giant’s Distinctive
Business Practices
“There are people who say there is no room to compete with Wal-Mart on price, but Aldi has figured out a way to do it.”
– Russ Jones, Vice President at Cap Gemini Ernst & Young, 1 in 2002.2 “We certainly recognize Aldi as being a tough competitor.” – Bill Wertz, a spokesman for Wal-Mart, in 2004.3
“We run our businesses extremely efficiently and reflect that in the price. There is no such thing as a free carrier bag or a free loyalty point. The cost is always passed on to the customer.” – Tony Baines, Head of Buying for Aldi in the UK, in 2005.4

THE LAND OF THE HARD DISCOUNTER
In July 2006, Wal-Mart Stores Inc. (Wal-Mart)5, the largest and most successful retailer in the world, announced that it would close down its retail operations in Germany and exit the market. At the time of the exit, Wal-Mart operated 85 stores in Germany. The company announced that it would sell its operations to German retail major Metro AG6. The financial details of the agreement were not disclosed, but Wal-Mart reportedly booked a $918 million pre-tax loss on the venture.7 Other than the South Korean market (from which Wal-Mart exited in May 2006)8, Germany was the only other international market in which the company had faced major problems. Wal-Mart had entered Germany in 1998, but had found the going tough from the very beginning. The main reason for this was the clout enjoyed by hard discounters9 like the Aldi Group (Aldi) and Lidl & Schwarz Stiftung & Co (Lidl) in the country. Wal-Mart, known worldwide for its low prices, had 1

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An international retail consultancy based in Paris.
John Karolefski, “Aldi,” Brandchannel, July 10, 2002.
“The Next Wal-Mart,” BusinessWeek, April 26, 2004.
Carol Midgley, “The Bargain Hunters,” Times Online, October 31, 2005 Wal-Mart based in the US, operated discount stores, combination discount and grocery stores, and Supercenters in most of the major markets around the world. In the fiscal year ended January 2006, Wal-Mart had sales of $315 billion and employed more than 1.8 million people. The company operated more than 6000 stores around the world. Metro was the biggest retailer in Germany. In the fiscal year ended December 2005, the company had revenues of $65.9 billion. The company operated around 2,100 wholesale stores, supermarkets, hypermarkets, department stores, and Media Markt and Saturn consumer electronics stores around the world (although more than two-thirds of its operations were in Germany). (www.hoovers.com)

“Wal-Mart F3Q07 (Qtr End 10/31/06) Earnings Call Transcript,” http://retail.seekingalpha.com, November 14, 2006.
Wal-Mart exited South Korea, selling its 16 stores to a local retailer, the Shinsegae Group, for $882 million. Hard discount stores are those which sell products at prices that are even lower than those in traditional discount stores like...
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