Aldi: Culture and Operations of a Hard Discounter (2023) | Hacker News Reader

Aldi: Culture and Operations of a Hard Discounter (2023)

inpractise.com

91 pointsalexzeitler69 comments

I absolutely love Aldi -- they do several big and subtle (with big results) things that other retailers fail on:

(1) Their store brands are consistently on-par or better than the name brands. It's no "Kirkland Signature" but I've found short of about three things, I like the Aldi product better[0].

(2) Their prices are good enough that I don't have to plan with coupons/nonsense. I analyzed this a few years ago (so long ago that newspaper coupons were still the only "real" coupons offered by food vendors) and found it was worth the time savings to skip the chore and just go to Aldi.

(3) Their "Aisle of Shame" (close-out random goods) is fun. I frequently find excellent products at ridiculous prices ($30 off-brand blender worked longer than the $200 I replaced it with).

(4) Their near-frustration free check-out.

Honestly #4 is the reason. Their check-out staff will rip through a cart faster than you can unload the groceries. They can do this because Aldi ensures their store branded products have barcode labels that extend the length of the box and appear on nearly every surface[1] (and they minimize the movements required of their staff to perform that job). You can have 4 people with full carts in front of you and they're cleared out before a typical Walmart scanner handles one half-full cart.

When I saw they introduced self-checkout, my heart sunk, but I used it. I think it's the only automated check-out system I've used that works. You get that product anywhere near the laser and it scans. It's amazing how much of that process comes down to the barcode scanner working properly.

[0] In one case -- their Mocha iced coffee -- I can't drink other brands any longer

[1] In some cases they slap a barcode on non-store branded products.

Recently, Aldi has started TV brand advertising here in PA, one of their biggest US markets. I was actually shocked by how incredibly core to the store moral their ads are - they literally brag about their smaller sku count, small stores, no cart pushers, and no loyalty cards. The tag line is 'Because, everything we don't do, is for you.'.

Here is the over the top holiday ad: https://www.youtube.com/watch?v=VUWqmctnWa8&ab_channel=ALDIU...

The newer non-holiday ads are more direct to the point on the checkout efficiency.

If I didn't know better, I would say they were working with TBWA\Chiat\Day or re-incarnated steve jobs to run their ad campaign.

Edit: It is a Leo Burnett Campaign.

>everything we don't do, is for you

This approach is called "Intelligent Refusal" of product selection, when profit:price:customer value ratio trumps any popularity concerns for stocking that product. From the Sol Price (costco) school of thought.

I think it works because they recognize you don't have to delight the end-user as much as the purchaser, the end-user can just ask for more of another product to fix any short comings like dryness or lack of taste.

Not a grocery store, but Uniqlo's self checkout is dead simple: you dump your clothes into a bin at the checkout, and it scans them all at once. Done.

(I mean, you still have to pay, but the scanning part is basically instant)

That was always the dream of the big retailers: push a cart through a gateway and your order is tallied instantly.

However, you need RFID tags on each and every item in the store, including produce and things you scooped into bags yourself. And, at Walmart scale, adding $0.02 per item in packaging is probably a margin killer.

Uniqlo is able to do this because they produce and tag the items by themselves. I agree it's cool, but it's a very narrow case.

Totally agree with #4. My wife recently double scanned an item at the self checkout. At every other store, this means deleting the item from the scan list then waiting for an employee to come over, login, and approve the removal.

Nope, not at Aldi! She deleted the item, it alerted the employee, then the employee at the next checker over called out "Did that fix it for you?". The employee was able to handle that right from their POS station without getting up.

A friend used to work at Target and mentioned their self checkout minimum time between scans is dramatically larger than on the checker POS.

Protip for Target: every self-checkout has a barcode gun. You can check out significantly faster if you use that instead of the built-in scanner.

Every Walmart employee who works SCO can do that with their company issued phone…

The thing is, all self checkout systems have remote access like that.

When I was at Kroger, corporate demanded that you never use it and instead walk over to every single kiosk every time and go through the ordeal of logging into maintenance mode and fixing the problem.

The software tracked how many times you did a remote action and you'd get chewed out for it.

That's why you have to wait for the single employee to fix 12 machines one at a time. It's not a technical limitation at all. Corporate thinks that the "personal" interaction is more valuable than immediately fixing your problem with no waiting.

Aldi respects your time. Kroger et al only care about MY BRAND

100% agree with #4. Enjoy it while it lasts though. All the Aldis near us for us have removed almost all of the checkout lines for the self check out. They are the worst. Imaging shopping for a large family with a fully loaded card and have to scan 100+ items.

Alas, our local Aldi has almost completely gotten rid of the old checkouts. Now it's typically one staffed checkout lane, with the rest all being self checkout.

I don't mind self checkout for small purchases, but when I've got $200 worth of groceries, plus family in tow, I really don't want to deal with self checkout at all.

I only have one tiny human in tow whenever I hit up Aldi, but my trick is this: Let them run the scanner gun. The minion hates going to the store, but they love being able to pull that trigger. I just have them hold it and then I point the barcode in their direction and say "Scan" or "Fire." That makes the self-checkout halfway livable.

Our local discounter has scanner guns you can give your kids to scan everything while shopping. At the checkout, you just put it back, pay the total and off you go.

It keeps the kids happy and if you put everything directly into your bags it's all packed and ready to go.

If memory serves correctly, Aldi Nord was one of the last big supermarket chains in Germany to introduce scanners at the registers (2003?), because their existing system was simply faster: Each item had a three-digit code, and all cashiers knew all codes by heart.

It was a race between me placing items on the conveyor belt and them ringing the items up. Oh the embarrassment when they told me the total as I was placing the last item on the conveyor belt.

> Aldi Nord was one of the last big supermarket chains in Germany to introduce scanners at the registers (2003?)

Aldi US is owned by Aldi Süd. Aldi Nord Owns Trader Joe's.[0]

They are two distinct entities now which carve out the markets between them.

[0] https://en.wikipedia.org/wiki/Aldi

Great read. We just got an Aldi in my small southern college town a year or so ago. But we had one in my home town in the rural midwest since the late eighties, and because of that one they always popped out of the noise of suburban sprawl to me. So I've been to many across poorer, solidly (US) middle class, and relatively affluent areas.

The new one gave me the opportunity to watch something develop. This is anecdotal, so I may be off base and observing something artificial... but here goes. If you go to the one in my very blue collar home town to this day, the product line is dominated by the low-cost, no-frills value items. Stack 'em deep and sell 'em cheap bulk snacks and the like. They might even have a double aisle of shame. After my early experience with this one I went to others in nicer areas and the product line was very, very different - all the charcuterie items and whatnot. Well, the new one here started with a really even mix of the low and high end products. As the location gained more popularity, the nicer items started to take shelf space away from the lower end stuff. So - I could be seeing things, but I think Aldi has a kind of regional (or national?) stock balancing system where they make the most of their smaller footprint by analyzing sales trends for a particular location and stock it with the items that will sell there.

Anyway, the new one here is visibly taking market share from the national chain supermarket a couple blocks away where people usually have to go for premium items. I'm really glad it's here. It's ... halved? my grocery bill.

I've come to appreciate Aldi; my wife's nose for bargains has helped me see that they hit a sweet spot of lowest price/sufficient quality for many items.

However, their days of being genuinely cheaper than other options may be numbered, as the market balances out. I see the new stores in my part of the US trying to emit a more upscale vibe, and I've seen instances of individual items being sold at much higher prices than you can get them at in bulk at Costco.

It might be the mid term effect of the original founders having left the show (they died) and the next Generation being less stringent in their business strategies.

They have been doing the same in Germany over time. Their stores used to be a lot more cramped and dingy, but other discounters like Lidl eventually started upping their game in an attempt to poach some of Aldi's market share. This led to several rounds of ugprades over the last 15-20 years. The result are stores that look much more upscale, and they are selling more brand-name and generally higher quality items than before while still offering the same cheap staples. But they seem to have compensated by increasing their operational efficiency. For instance, nowadays all of their staff are wearing headsets for radio communication, which was not the case a decade ago or so. So I wouldn't want to bet against their ability to keep prices low. They are essentially to brick and mortar retail what Amazon is to e-commerce in terms of optimising their operations to the last detail.

I'm blown away by the floor tile. The interview goes off on a side thread there but is a perfect example of long-term thinking on Albrecht's part.

The fact that they also don't trust American crews to install this floor properly is pretty interesting, too.

As an architect this part made me happy. The way we build is an expression of our values and I think this sums up the Aldi way perfectly.

A quick web search found a few PDFs from various construction firms that deal with Aldi. Every single guide has some verbiage in there saying "prep the floor in the following manner, then step aside when the German tile subcontractors show up"

It's the Sam Vimes boots theory in practice: https://en.wikipedia.org/wiki/Boots_theory

--- start quote ---

The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money. Take boots, for example. ... A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while a poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.

--- end quote ---

From my experience with German friends and family, this philosophy is extremely ingrained in their culture. They don't understand disposable Walmart-style products and will proudly pay more for quality items that last multiple times longer than their dollar-store counterparts.

Aldi consistently sells avocados for 60% less than the discounted avocado at the big chains. And this is in an area where avocados aren't grown.

How are they able to do this across so many food categories? The interview doesn't answer this question.

By having a really low range of inventory and really high turnover of that inventory so they focus on bulk buying only a few items. Walmart sells everything and there is a cost in supporting being a one stop shop. In Aldi it's typical to have 1 type of smoked back bacon for example while Walmart might have 10 types of smoked back bacon.

They try to cut out as many layers of middlemen as possible, and then act as a reliable partner (they pay in full, on time, every single time and never make a supplier refund them for unsold product).

In the case of your avocados, they're probably buying them directly from the farmer:

> When you partner with ALDI you can expect simplified processes that give you more time to invest in your business, while receiving high-volume, timely orders that allow you to plan ahead.

> Prefer to work directly with manufacturers or growers [1]

[1] https://corporate.aldi.us/suppliers/become-a-supplier/

Their own chocolate brands are probably the best ones among supermarkets, and it's dramatically cheap.

If you’re interested in grocery stores check out The Secret Life of Groceries[0]. It’s a book that goes into the history of grocery stores in the US along with how the modern supply chain works from sourcing to production to delivery to selling.

It also covers how Trader Joe’s and Aldi differed historically and the process that led to Aldi buying Trader Joe’s.

0:https://www.penguinrandomhouse.com/books/253715/the-secret-l...

Aldi pays top salaries, but also expects top performance. An adage goes that they pay you 1.3x the salary of a normal store employee, but expect the performance of 3 employees;-)

They were know for doing cashier drills in the pre-barcode age: you had to sum up a shopping cart filled with certain products and report the sum plus time needed. Even now cash desk time per customer is measured - with crazy outcomes, e.g. AlDi cashiers putting groceries in the shopping bag for elderly people so that the dont block the queue too long.

An ALDI in the region introduced something, that was unheard of them before.

Until now, there was never an area after the cashier to collect & bag your stuff, but instead there was a place to park your shopping cart, so the cashier could toss all of your goods right into it, clearing the area as fast as possible to process the next customer.

But now, an ALDI here introduced the collect & bag area with a split - just like many other super markets, so one customer can pack its stuff while the other is already getting its groceries processed.

But all this with a twist: there's a separate payment terminal for each collection area, so the payment of the first customer doesn't block the cashier and the register from handling the next one.

I was quite astonished and impressed (as I thought about it) the first time I saw two fricken payment terminals at one cash register (Aldi Süd, Germany). Around COVID time, people started to pay more often by card, and someone at Aldi realized pretty quickly how they could use that to improve efficiency.

There are obviously some ugly failure cases, but they don't pay those high salaries to get dummies who couldn't handle that.

Aldi's relationship to Trader Joe's in the US:

https://www.aldireviewer.com/aldi-and-trader-joes-are-they-t...

https://www.msn.com/en-us/money/companies/who-owns-trader-jo...

For the lazy (and from memory): there's Aldi South and North in Germany (original brothers kinda divided Germany). North bought Trader Joe's ages ago. Aldi South came too the US as Aldi. Iirc North is mostly Europe only as Aldi.

From what I've heard, Aldi South is slightly fancier, but I've never been in one.

The split between Aldi Nord and Aldi Süd came about when the brothers had a difference of opinion over selling cigarettes.

I don't think TJ's sells cigarettes, FWIW. But from what I've heard, they're hands-off with TJ anyway.

Fascinating:

> The first thing that struck me was an absolutely rock-solid commitment to gaining the trust of the customer, the employees, the suppliers and business partners. Almost every rule or method or procedure of the company was built around ensuring that. To be frank, I hadn’t seen something like that before.

Yes, looking after your customers is a standard prerequisite for a good retail company, so that wasn’t so different or difficult to understand. But really looking after your employees, that was something new to me. For example, having a mantra that says, let’s pay our people as much as we possibly can. I had been involved in the complete opposite before. What do we need to pay; don’t pay a cent more, would probably be the mantra of most of the other business conversations that I had been involved in.

Another Interview with the same guy on the same site

Aldi: Hard Discounter Business Models

https://inpractise.com/articles/Aldi-hard-discounters-paul-f...

If you want to listen

https://www.listennotes.com/podcasts/in-practise/aldi-cultur...

>There were these myths or legends in the business, which I didn’t, personally, experience, but I knew about them and I could tell you 50 stories like that.

I wish I could hear more of them. Someone should write them all down.

Worth mentioning that Aldi has owned Trader Joe's since 1979. I have barely been to Aldi's, but it seems like they have similar products if a bit different themes.

From someone's link above:

> Therefore, if you hear that Aldi and Trader Joe’s are owned by the same group in the United States, you can tell them the truth. While there is a connection between the ownership groups of Theo and Karl Albrecht, they are separate ownership groups that run very different stores that are only connected by the Aldi name.

https://www.msn.com/en-us/money/companies/who-owns-trader-jo...

Aldi brand items are very similar to human food.

Is it so bad in the US? In germany their food is often quite nice, compared to other discounters. (This is a personal opinion, but has also been claimed in some television reports where, for example, various ice creams etc. were tested.)

It’s not bad here. Some aldi brand items aren’t as good (such as their cheez-it), but generally everything is of good quality. I think the only thing you can complain of is that the US stores are smaller and offer less (ex no in house bakery)

I think the problem with their cheez-its is that they are knockoff cheese-nips instead.

Some knock-off products aren't as good as the originals, that's also a "problem" here, but the discounters do this with almost every well-known product and the quality is usually okay.

If you are buying staple goods, Aldi quality is quite nice. For some luxuries (fancy cheese, chocolates) their quality is very good, especially for a discounter.

If you only want to buy processed food and meal kits that require minimal cooking, then Aldi has subpar quality. Many of the prepackaged meal kits and processed foods are notably lower quality than what you find in other grocery stores.

The chocolate bars are an astonishing value.

The two big online video advertisers I noticed in December were Amazon and Aldi, but the ads could not be more different.

Amazon's ads were irrelevant to the brand, they were just showing stories that people were supposed to react emotionally to. (And they never said that the guy at the Llama farm is paying the same for prime as people who get same day shipping except he gets five day shipping.)

Aldi on the other hand was really clear about why Aldi was different from other retailers and were a lot more compelling to me. (I did buy from Aldi in December, I didn't buy anything from Amazon.)

I ordered from Aldi for the last time yesterday. The cheese was flavorless, I ordered 3 kinds. The kids reject the Nutella substitute. Their cereal is made from 70% cardboard. Produce is good but all Aldi brand stuff that I have had is trash.

Their cuts of meat are often sub-par, especially the beef.

Otherwise, the quality of their goods is pretty high.

Do they still require a quarter deposit on shopping carts?

One opened in the US city where I lived ~15-20 years ago, and they required a coin deposit to use a shopping cart. I don't cary change (not even back then), and requiring a deposit on a cart is the mark of a bad neighborhood. So I just left, and have never returned to an Aldi.

Yes, though you can ask a cashier for a quarter, at least at the stores I've been to. Feels ore satisfying than it probably should to get an occasional quarter or two for bringing stranded carts back on the way in also.

Candy money for kids !

A coin deposit is no more a mark of a bad neighborhood than having cart corrals in the parking lot -- like them, it is a way of reducing (or trying to eliminate) the amount of time employees have to spend collecting carts and returning them.

A coin deposit is a signal that either the carts are being stolen, or that they are not being returned to the cart corral. Both are signs of a bad neighborhood in my area of the country.

This is a true statement, but I suspect the underlying goal is to reduce overhead and pass the savings on to the consumer and/or the bottom line. This is because if carts are stolen they must be replaced, and if they are not returned to the corral a worker must be paid to do it.

I'd say you are missing out. On the other hand, more for the rest of us!

I keep a couple of quarters in the car just for the Aldi shopping cart.

On a few occasions I've found a couple of quarters on the brick window sill next to the carts at my local Aldi. I was pleased by the take-a-quarter-leave-a-quarter honor system.

Yes, they do. That's a rather strange reason to not frequent a store. Keeping a single quarter in your car is well worth the savings you get from them not having to hire cart corrallers.

I am only approaching middle age in the US but I never saw coin deposit for carts anywhere else. With that said I would never suspect it has anything to do with crime and all about incentivizing people to bring their own carts back instead of having to pay employees to do it.

Parking lots full of unreturned shopping carts are a sign of a bad neighborhood in my area of the country.

The need to require a quarter deposit implies a lack of trust, and an "FU" to the customer. I return the "FU" by not frequenting the store.

Right, I am suggesting that you have the wrong mental model. You are obviously entitled to do anything you want or think anything you want. From an economic model the quarter deposit is to reduce having the need for employees collecting carts. Thats the Aldi's model, low prices through process optimizations. Now that might not be the model you like to shop at and it is a free market but I find it silly to adopt such a hostile take on it.

I have been all over the United States and I have never had such an observation on carts but hey you learn something new every day.

I've live in western NY, OH, NC, VA, FL and the Bay Area. The only place where I've found that a messy parking lot doesn't correspond to a bad neighborhood is in the Bay Area. I'm specifically thinking of the Safeways in Mountain View & Palo Alto

You should conduct research perhaps we are missing a new economic indicator.

Going back to the main point. While it might seem as a company stiffing you, it’s mainly for economic reasons at Aldis. They run on a very lean model and part of it are small things like not having employees collect carts.

This is very common in Germany, I and my wife both carry small metal "coins" for them.

If you don't have a quarter, just ask the cashier and they'll lend you one!

That's basically the norm for supplements in Germany (and to some extent in Europe). It's rather common for people to have a small coin-like plastic or metal chip on their keychain which can be used for shopping carts.

You know what is a sign of a good neighborhood?

When you are comfortable approaching a stranger in a parking lot with a quarter in your hand, saying "Hey, I'll take that cart, no need for you to return it".

An even better sign is when that stranger declines to take the money and just asks you to pay it forward.

I've done both several times, in rural areas and big cities and have seen others doing the same.

Give it a try some day, it's fun.

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