Aldi Marketing Strategy: SWOT Analysis and Recommendations

This report analyzes Aldi's marketing strategy, conducts a SWOT analysis, and provides recommendations for maintaining its position as a leading discount supermarket in Australia. It discusses the key issues faced by Aldi, identifies critical success factors, and explores strategies to tackle competition from Woolworths and Coles. The report recommends diversifying product range, enhancing product quality, and expanding into potential markets. It also suggests offering loyalty card services and adding products to attract customers from different cultures.

Running Head: ALDI
Marketing Strategy
ALDI
Student Name
Institute Affiliation
1

Running Head: ALDI
Executive Summary
Aldi is regarded as a favorite label of discount-seeking grocery buyers. With 500 stores in
Australia and over 10,000 stores across the world, Aldi has earned the position of being a
leading supermarket in Australia. Aldi’s success sure is well-recognized in the grocery
industry as a leading discount supermarket. Since Aldi’s good-quality and low-priced
groceries is negatively affecting the sales of other key players in the grocery industry of
Australia, rival brands like Woolworths and Coles have come up with reactive tactics.
Woolworths Limited and Coles Supermarket Australia Pty. Ltd are using a similar tactic of
reinvigorating the focus on private label.
This report is an attempt to understand Aldi’s marketing strategy, the critical factors that
worked for Aldi, and to conduct a SWOT analysis. The following sections also discuss how
Aldi can maintain its position as a leading discount supermarket in Australia, and discuss the
strategies which Aldi shall adopt to tackle Woolworths and Coles reactive tactics.
It recommends how with an established reputation as a value-proposition and affordable firm,
it’s time for Aldi to diversify their products range, enhance product quality, and expand into
potential markets. There are a great many rivals and substitutes for Aldi, and so, loyalty can
be an issue. Ergo, the company should offer loyalty card services to point based rewarding
system. This will ensure customer marketing. Since the UK is culturally diverse, Aldi can
also add different products to attract people from Indian, Chinese, and Caribbean culture.
2

Running Head: ALDI
Table of Contents
Executive Summary...............................................................................................................................2
Introduction...........................................................................................................................................4
Identification of the key issues..............................................................................................................4
Identification and prioritization of critical success factors.....................................................................4
SWOT analysis......................................................................................................................................5
Strategy recommendations....................................................................................................................5
Conclusion.............................................................................................................................................5
References.............................................................................................................................................6
3

Running Head: ALDI
Introduction
Aldi holds a strong position in the Australian retail sector. The company opened its first
market in the year 2001 with a unique positioning. Aldi placed its name in the industry as a
discount retailer offering limited lines by private labels and low-price value propositions that
met the demands of value-conscious people. Aldi’s marketing strategy was in contrast with
the national brand's prioritization which was common in the industry during that time.
Gradually, Aldi became one of the favorite retailers among Australia’s value-conscious
buyers (Arce-Urriza and Cebollada, 2018).
The weak national economy spurred the company's growth due to the global financial crisis
during that time. The company stirred up the retail industry by prompting significant changes.
It became a favorite label of discount-seeking grocery buyers. Grimmer (2018), reported that
with 500 stores in Australia and over 10,000 stores across the world, Aldi has earned the
position of being a leading supermarket in Australia, Europe, and twenty other countries. The
core of Aldi’s marketing tactics has always been competitive pricing and cost leadership.
Identification of the key issues
Aldi's success sure is well-recognized in the grocery industry as a leading discount
supermarket. Since Aldi’s good-quality and low-priced groceries is negatively affecting the
sales of other key players in the grocery industry of Australia, companies like Woolworths
and Coles have come up with reactive tactics, which is now a vital issue for Aldi (Smith,
2016). Both Coles and Woolworths have developed the private-label strategy which offered
margins for the supermarket rates. These brands are now offering products with appearance
and quality similar to national brands, but their prices are more reasonable and competitive.
Woolworths and Coles have private labels like Smart Buys, Homebrand, etc. Both these rival
companies are now strategically targeting the same consumers as Aldi (Chernev, 2015)
Identification and prioritization of critical success factors
Critical success factors for Aldi includes their innovating and successful branding strategy
based on delivering value and private labels. With quality products available at lower prices,
Aldi played a critical role in changing the Australian customer’s opinion on private labels
(Rao, Agarwal and Dahlhoff, 2004).
Where companies like Coles and Woolworths place their products at the bottom of shelves
and used ‘no-brand strategy’ with plain packaging, Aldi focused on keeping its range of times
on the top shelves, where it was visible to everyone. Aldi understands that plain packaging
reflects low pricing, but at the same time, it also creates a ‘low-quality' perception. Hence,
Aldi focused on packaging as an essential part of influencing buyer’s perception, product
experience, and evaluation of quality (Geyskens, 2018).
According to Geyskens (2018), another critical factor is how Aldi built its business model on
delivery value to the customers by leveraging the private label power. First, Aldi increased
the proportion of offered products while narrowing the variety per category. Second, it
adhered to stringent quality control measures, high-quality packaging, and phantom-brand
strategies to guarantee top-quality products. Third, it fostered a close relationship with
suppliers.
4

Running Head: ALDI
SWOT analysis
Strength: Aldi’s has a good reputation for among value-conscious buyers, and another factor
that contributes to Aldi’s strength is the success of the Company's private label. They also
have a close relationship with suppliers, which facilitate distribution and product supply.
With presence across multiple countries and successful positioning in the Australian market,
Aldi holds a strong position in the industry. (Smith, 2016)
Weakness: Since it’s a discount store, Aldi thrives on a low margin. Few factors that add to
the weakness is their dependence on sales volume for profit, poor employee satisfaction and
high attrition. Aldi also lacks penetration opportunity for high-income group customer.
Opportunity: For Aldi, opportunities include new products categories and variations. They
can also exploit other areas of the market by making more investment in advertising and
marketing.
Threat: Coles poses a threat since it follows a similar private label strategy. The Phantom and
Multi-tiered brand strategy of Woolworths and other potential new entrants in the grocery
industry pose a threat. Since Amazon is offering doorstep grocery delivery, many customers
are switching from Aldi to Amazon.
Strategy recommendations
Quality enhancement can be one of the recommended strategies for Aldi. This way, the
company can target people from high-income groups too and those who are quality and
health conscious buyers (Rufaidah, 2017). By focusing on quality product and by creating a
specific segment for premium quality grocery items, Aldi will be able to establish a market
for buyers from the upper-middle class. This way Aldi can also position itself as a reasonable
and ‘quality-focused’ brand instead of a ‘cheap’ brand (Smith, 2016)
Expansion into price-conscious economies like Asia and Africa is another suggestion for
Aldi. Since Asia and Africa are developing economies, the majority of the population is
middle-class or lower-middle class, and they make buying decisions based on the product
price. Hence, Aldi should expand and penetrate these two markets. Aldi should offer loyalty
card services to point based rewarding system. Aldi can also add different products to attract
people from Indian, Chinese, and Caribbean culture (Steenkamp, 2017).
According to Smith (2016), Aldi also has a scope in offering value-added services like click
and collect and doorstep delivery. For Aldi to cover significant market share, a potential
service area to exploit is doorstep grocery delivery. Similar to Amazon’s marketing tactic of
delivering fresh grocery, Aldi can also switch to this form of selling. This way customer will
be getting additional service, and thus the switching cost for buyers will be high.
Conclusion
Aldi has immense potential for growth in the grocery industry. Critical success factors for
Aldi includes its innovative branding strategy based on delivering affordable private labels.
With an established reputation as a value-proposition and affordable firm, it’s time for Aldi to
diversify their products range, enhance product quality, and expand into potential markets
like Asia and Africa. Aldi can also establish a market for buyers from the upper-middle class.
5

Running Head: ALDI
References
Arce-Urriza, M. and Cebollada, J., 2018. Assessing the success of private label: differences
across categories in the grocery industry. Electronic Commerce Research, 18(4), pp.719-753.
Chernev, A., 2015. The marketing plan handbook. Cerebellum Press.
Grimmer, L., 2018. The diminished stakeholder: Examining the relationship between
suppliers and supermarkets in the Australian grocery industry. Journal of Consumer
Behaviour, 17(1), pp. e13-e20.
Geyskens, I., 2018. Retailer power in the grocery industry. In Handbook of Research on
Retailing. Edward Elgar Publishing.
Rao, V.R., Agarwal, M.K. and Dahlhoff, D., 2014. How is clear branding strategy related to
the intangible value of a corporation? Journal of Marketing, 68(4), pp.126-141.
Rufaidah, P., 2017. Branding strategy development based on innovative
behaviour. International Journal of Business and Globalisation, 18(3), pp.396-416.
Smith, R.L., 2016. The Australian grocery industry: a competition perspective. Australian
Journal of Agricultural and Resource Economics, 50(1), pp.33-50.
Steenkamp, J.B., 2017. Global brand strategy: World-wise marketing in the age of branding.
Springer.
6