In this report, the marketing strategy of supermarket store company Aldi has been explored. This paper discusses the company, its background and performances in the past years. The company’s growth and its main competitors are also explored in the Australian supermarket retail store industry. Further, the marketing strategy adopted by the company in Australia has been analysed in this paper. The strategic recommendations have also been provided in this report.
Table of Contents
Background of Aldi
Recommendations based on the marketing strategy analysis.
Aldi is a foreign company which has entered the supermarket retail store industry of Australia in 2001. With its effective marketing strategy and superior services to the customers it has acquired a reasonable share in the market. Further, the company has opened many stores across different cities of this country. This is an emerging company which is challenging the market shares of the supermarket giants- Woolworth and Coles in this country. The success of this country in the last decades have been attributed to this strategic marketing management which has resulted in the growth of this sales figure and customer reach. It has also moved to online platform for increasing its reach to the customer during the Covid times. However, the company is operating in a highly competitive industry where there are supermarket giants and small retailers offering products at cheap prices. It has also witnessed a drop in its growth rate from previous years (Butler, September 16, 2019). Therefore, there is a need to analyse the marketing strategy of the company and suggests strategies which can be adopted to enhance its market position in this country.
German based Aldi company was started by Theo and Karl in 1948. Currently, it has become one of the leading global retailers in the world. Aldi owns more than seven thousand stores across the world. Aldi has flourished over the years with its many stores in different cities since it entered in 2001. The strategy behind the success of Aldi is that it follows a worldwide policy of giving people the best quality products at low prices (Evans, May 16, 2019).
Aldi stores company is a type of limited partnership company which operates in the grocery stores and supermarkets industry. It is a foreign owned private company. The head office of the company is located in Minchinbury, New South Wales which manages its stores all over Australia. The 80% of Aldi stores is held by Aldi Pty Ltd and 20% by Aldi Foods Pty Ltd. These companies are completely owned subsidiaries of Hofer KG, which is a supermarket company based in Austria (IBIS, 2020). More than 500 stores of Aldi company are operating in New South Wales, Victoria, Western Australia, Queensland and Australian Capital Territory.
The competitive landscape of the industry has been changed considerably by the rapid expansion of Aldi. The reason of this expansion is the popularity of low-cost private label products which fueled this sharp growth. Coles and Woolworths, two leading companies of this industry, had to decrease prices and increase their private label product ranges in response to the popularity of Aldi. In this increasingly price competitive industry, smaller supermarkets have struggled to compete.
In the next ten years, Aldi might be able to double its share in the Australian supermarket industry. According to industry research firm Roy Morgan, the market share of Aldi in 2018 was 11%, Woolworths had 34% and Coles had around 27% (Powell, August 7, 2019). In 2019, the customer penetration of Aldi reached 4.76 million households whereas Woolworths Group had 7.2 million households reach (Hughes, May 14, 2020).
Aldi is performing well on price and quality and it is expanding three times faster than its competitors. Due to this reason, it has become a threat inside the Australian supermarket. If the market share of Aldi doubles up then 22% stake would belong to this foreign-owned operator. The rest two leading retailers could claim market share between 22 and 28 per cent if there are corresponding decline in the market share of the leading supermarkets companies (Powell, August 7, 2019). There is a 3.2 percent rise in sales to £22.9 billion and around 13 percent rise in pre-tax profits as divulged by Aldi Butler, S. (September 16, 2019).
The marketing strategy of Aldi is focused higher quality and lower prices. The key elements of its marketing strategy are exclusive brand products, limited product range, focus and price change policy. The marketing mix is a set of strategies which are used by the organization for developing plans of actions pertaining to price, place, product and promotion of their offerings (Ikechi, Chinenye, & Chiyem, 2017). For this store, this concept is taken for analyzing the marketing strategy of Aldi.
Product – the company is offering a limited range of products which are of high quality. 95 percent of its products are private-label brand which helps the company to ascertain their quality by monitoring its production. It also avoids wastages in its production processes in order to improve quality of its production as well. Such a strategy is effective as it allows the customer to not get confused with a larger range of products. Moreover, the company is offering quality products in a limited range which helps the customers in making effective decisions. However, less products may also gain less popularity amongst the customers and they may visit other shops where the range of products is larger. Aldi is focused on the low-income customers and is only supplying the basic needs of the customers.
Price- the company has competitive advantage in this respect as it is able to sell its product at lower prices than the competitors in the industry (Boyer, et al 2018). Moreover, the lower prices do not account for lower quality (Staus, 2011). The pricing strategy of the company has made it capture a higher market share since it has entered into the market. They have made limited investment so that they can keep their expenses low and provide maximum benefit to the customers in the form of value of their money for their products.
Place- a number of stores have been opened by the company in the different cities of the country to expand its market reach. Their stores are designed in a simple manner so as to reduce wastages and cost. While establishing a new store four aspects are considered and these are good visibility of the location, convenient transportation, availability of parking space, accessibility and demographical factors of the area. The company with its place and distribution strategy aims to benefit the consumers by reducing their time spent in travelling. By reducing the cost of the store maintenance, it is able to provide more value to the customers in their products.
Promotion- the company uses a range of method for targeting their audiences. Both above-the-line and below-the-line promotions are undertaken by the company. It is utilising both print and digital media which are the above-the-line promotions as in this the customer has no control over the communication. While in the latter, there is two-way communication where the customer can give their feedbacks and complains like on social media page of the company. Recently, it has entered on the social media sites as well. The company had developed a ‘like brands’ and ‘Swap & Save’ campaigns for increasing the popularity of their products. The company is also communicating the customers for promoting its brands through public relations by using emails and mobiles. This is done to enhance customer loyalty and increase its customer base. However, the company does not invest heavily in promotion as it has to keep its cost lower so that it can supply the good quality products to the customers.
The company is operating in a highly competitive industry in Australia. Further, the country has been hit hard by the Covid pandemic which has serious implications for the consumer spending pattern in this country. This implies that there shall be a decline in the sales of the company. hence, the company needs to take efforts to market its products effectively so as to shield itself against the volatilities in the busines environment of this country. Following are some of the recommendations which can be taken by this company.
It is therefore, concluded that the company has to face tough competition from the supermarket giants. This requires the company to take up marketing strategies apart from the low cost and higher quality strategy to attract the customers. It has to provide more services to the customers by giving home deliveries so that more customers can avail its services and purchase its products during the lockdowns.
Boyer, S., Carr, J., Loomis, S., Prothero, M., Street, Q., & Chen, J. (2018). Could Aldi Succeed in Canada?. Retrieved from https://digitalcommons.bucknell.edu/cgi/viewcontent.cgi?article=1007&context=glbm400
Butler, S. (September 16, 2019). Aldi profits dive as firm focuses on expansion and price cuts. Available at https://www.theguardian.com/business/2019/sep/16/aldi-profits-dive-as-firm-focuses-on-expansion-and-price-cuts
Evans, S. (May 16, 2019). Aldi sales rise 10 per cent to top $9b. Available at https://www.afr.com/companies/retail/aldi-sales-rise-10-per-cent-to-top-9b-20190501-p51iwe
Felix, R., Rauschnabel, P. A., & Hinsch, C. (2017). Elements of strategic social media marketing: A holistic framework. Journal of Business Research, 70, 118-126.
Hughes, C. (May 14, 2020). Total group sales revenue of Coles Group in Australia from the financial year 2014 to 2019. Available at https://www.statista.com/statistics/1050187/australia-group-sales-revenue-of-coles-group-supermarkets/
IBIS. (2020). Aldi Stores (A Limited Partnership) - Australian Company Profile. Available at https://www.ibisworld.com/au/company/aldi-stores-a-limited-partnership/7944/
Ikechi, A., Chinenye, E. P., & Chiyem, O. (2017). Marketing Mix Concept: Blending the Variables to Suit the Contemporary Marketers. International Academic Journal of Management and Marketing, 9(1), 55-65.
Powell, D. (August 7, 2019). Duopoly no longer: Aldi could be as big as Coles and Woolies by 2030. Available at https://www.smh.com.au/business/companies/duopoly-no-longer-aldi-could-be-as-big-as-coles-and-woolies-by-2030-20190806-p52eh4.html
Staus, A. (2011). Aldi, Edeka & Co.–Consumer preferences and store image. Jahrbuch der österreichischen gesellschaft für agrarökonomie, 13. Retrieved from https://oega.boku.ac.at/fileadmin/user_upload/Tagung/2010/Band_20_2/JAHRBUCH-20-2.pdf#page=27
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