Marketing Channel Issues Analysis: Aldi Australia Case Study Report

This report provides a comprehensive analysis of the marketing channels of Aldi Australia, examining its current situation and identifying key issues. It begins with an executive summary and table of contents, followed by an introduction to marketing channels and their significance. A detailed situation analysis is presented, including environmental factors, SWOT analysis, and PESTLE analysis. The report then explores Aldi's target market, customer service demands, and the structure of its distribution channels. The core of the report focuses on identifying the specific problems Aldi faces within its marketing channels, followed by proposed solutions to enhance its competitiveness and ensure long-term growth. The report concludes with a final decision and conclusion, supported by a reference list.

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ANALYSIS OF MARKETING CHANNEL ISSUES OF ALDI
ANALYSIS OF MARKETING CHANNEL ISSUES OF ALDI

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ANALYSIS OF MARKETING CHANNEL ISSUES OF ALDI
Executive Summary
In this report, the marketing channels of Aldi Australia has been discussed and the
present situation of the marketing channel of the company has been analysed. From this
analysis, the issues of the marketing channel have ben identified. At the same time, it has
been seen that the company faces tough competition in the retail grocery market of Australia.
How the issues can be overcome, and competitiveness of the company can be increased, have
been discussed in this report. With the help of these approaches, the company will be able to
sustain long term growth and profitability of the business is also expected to increase.

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ANALYSIS OF MARKETING CHANNEL ISSUES OF ALDI
Table of Contents
Introduction................................................................................................................................4
Situation analysis.......................................................................................................................4
Environmental analysis of Aldi Australia..............................................................................4
SWOT analysis...................................................................................................................4
PESTLE analysis................................................................................................................5
Target market of Aldi Australia and service output demand of customers............................8
Structure of the channel presently used by the company.....................................................10
Problem statement of Aldi Australia........................................................................................12
Solutions to the problems.........................................................................................................13
Final decision and Conclusion.................................................................................................15
Reference list............................................................................................................................17

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ANALYSIS OF MARKETING CHANNEL ISSUES OF ALDI
Introduction
The group of individuals, businesses, and programmes that collaborate to move things
(products and services) from the place of origin to the site of consumption is referred to as a
marketing channel. A marketing channel's main goal is to establish a connection between the
company that produces a good or service and potential clients who might be interested in
buying it. In order to maintain the efficiency of the marketing channels, it has been seen that
different companies take different approaches and these approaches contribute significantly
towards the success of the business organisations. Here, the business environment, marketing
channel, issues of the marketing channel of Aldi Australia has been discussed in brief.
Situation analysis
Environmental analysis of Aldi Australia
SWOT analysis
Strengths
● Significantly lower price of products
than the mainstream retailers
● Huge investment in improving
customers’ experience in the past
few years.
● Over 570 stores across Australia and
a highly efficient supply chain of the
company (Retail store formats,
2022).
Weaknesses
● Low margin is restricting the brand
from opening new stores.
● Satisfaction level of the employees
who are working at Aldi Australia is
poor
● The penetration rate of the company
in the high income group is poor.

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ANALYSIS OF MARKETING CHANNEL ISSUES OF ALDI
Opportunities
● Investment of the company in
technology is expected to have a
positive impact on the performance.
● Huge investment is expected to take
place in transforming the modern
distribution centres.
● Increasing digital presence of the
company will have a positive impact
on its revenue and growth.
Threats
● Intense competition by Coles,
Woolworths can be a threat to this
discount store.
● Product lines at the Aldi stores are
lower than that of Coles and
Woolworths stores (Wood et al.
2021).
● Lack of automation is having an
excessive burden on the employees
and can have a negative impact on
the overall performance of the
company.
Table 1: SWOT analysis of Aldi Australia
PESTLE analysis
Factors Description Impact
Political ● Safe and stable
political environment
● Fair and transparent
management system
followed by the
Mixed

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ANALYSIS OF MARKETING CHANNEL ISSUES OF ALDI
government of
Australia.
Economical ● 10th highest per
capita income in the
world
● 2153 billion AUD
GDP of the country
as per 2022.
Positive
Social ● People from different
cultures and races are
there in the country.
● Highly educated
citizens of the
country.
Positive
Technological ● 89.42 million AUD
is invested by the
Australian
government in
technological
advancement
● Significant
improvement in
technological
development and
Positive

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ANALYSIS OF MARKETING CHANNEL ISSUES OF ALDI
innovation.
Legal ● “Australian
Consumer Law” is
followed by the
businesses to protect
the rights of the
consumers.
● “Fair Work
Commission” is there
to ensure the
minimum wage of
the employees
working in the
country.
Positive
Environmental ● As per Mahavarpour
et al. (2022),
“Environment
Protection Act” of
1974 is followed by
the businesses and
sustainable
approaches are being
adopted
● Scarcity of natural
Mixed

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ANALYSIS OF MARKETING CHANNEL ISSUES OF ALDI
water resource is one
of the main
environmental
concern in the
country and this may
affect the business
negatively.
Table 2: PESTLE analysis of Aldi Australia
Target market of Aldi Australia and service output demand of customers
Aldi is one of the successful retail companies of Australia and the company has 9.5%
market share in the retail industry of Australia. It is necessary to assess the target market of
the company and at the first place, from the statistics obtained, it has been seen that ALDI
customers have a higher likelihood to be female, have lower household incomes than the
national average, and are older on average. Customers over the age of 60 make up a sizable
portion of those drawn to ALDI's value proposition. Additionally, 90% of ALDI shoppers use
their own vehicles to go to the centre, and they tend to come from the "secondary trade area"
more often (Grocery Stores & Supermarkets, 2022). Despite 35% of customers of this
supermarket chain being over 60 years old and 26% being retired, it has been seen that there
are young families as well as older couples who are the two Life stage groups that spend the
most money and visit the store the most frequently. If the segmentation of the market is done
based on the income level of the consumers, then it can be seen that the company mostly
targets the lower and middle income group of customers as they tend to have more interests
in discounted products (Grocery Stores & Supermarkets, 2022). Since the company is known
for providing high-quality goods at affordable costs, the brand's frequent clients are those

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with a frugal outlook. Customers between the ages of 25 and 45 make up the majority of
Aldi's customers since they frequently shop at retail establishments for groceries and
household goods. Aldi's corporate leadership employs a differentiation approach to target
consumers. To set their product and brand apart from those of other established and up-and-
coming industry rival firms, they place a strong emphasis on product pricing and consumer
psychology. The management of the organisation focuses mostly on consumers who regularly
purchase household items for their families. Aldi makes the claim that it would provide
consumers high-quality products at competitive prices in an effort to convince them to switch
from other retail brands to Aldi in order to meet their daily needs.
As mentioned by Steinbrenner & Turčínková, ( 2021), a channel fulfils customer
output requirements. “Bulk breaking, convenience in space, waiting and delivery times,
payment methods like credit, selection and variety, customer service, and information” giving
are a few examples of “service output demands”. The target market for Aldi's business
strategy is a pretty particular one: a shopper who views groceries as a utilitarian good. The
Aldi client is prepared to give up variety and service in exchange for low pricing and a
speedy shopping experience. Aldi has decided to regularly and predictably sell necessary
food items within a more affordable price range than its rivals in order to please this customer
segment. ALDI has made it clear that it values the integrity of its products and services by
adopting a moral stance toward the veracity and authenticity of the information it offers to
customers. This is demonstrated by their clever use of adverts that correspond to the content
on the package and, most crucially, by the availability of a website. This gives customers
knowledge about the company's quality standards, guarantees, and programmes related to
ethical sourcing, social responsibility, and the environment. By establishing warranties,
companies fulfil their commitment to satisfy customers by allowing customers to get
defective items repaired. It is necessary to evaluate the performance of the company on the

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ANALYSIS OF MARKETING CHANNEL ISSUES OF ALDI
basis of the customer satisfaction and it has been seen that in 2021, the company has
outperformed its competitors. The company has also bagged several monthly awards in 2021
for serving the consumers efficiently and it has been seen that the customer satisfaction rate
of the consumers of Aldi Australia was 95% during this period. Thus, considering the high
level of customer satisfaction rate of the company, it can be said that the service output
demand of the customers is very high in all the segments.
Structure of the channel presently used by the company
For businesses, the distribution channel is crucial since it facilitates customer ease in
terms of access, information search, and other activities. Whether a distribution method is
“intensive” or “selective” actually depends on the products that a business sells in the market.
Aldi has chosen to use a "selective distribution channel strategy" since the products they sell
can be complicated and may need assistance when a client is ready to make a purchase. Aldi
appears to have implemented "Push marketing techniques" across their company while
collaborating closely with their suppliers. As suggested by Gómez-Donoso et al. (2021),
“Push marketing tactics” frequently include producers rewarding distributors and retailers
like Aldi for promoting their products to consumers (MDPI, 2022). Logistics, which is
closely connected to distribution, usually include the planning, designing, integration,
management, and development of the procedures for transferring resources and commodities.
Distribution expenses are typically estimated to be over 50% accounted for by logistics. The
standard options for transportation include pipelines, trucks, shipping, and air freight (liquids
or gases only). Each of these modes of transportation has benefits and drawbacks of its own.
The firm's willingness to make either a time or financial sacrifice actually relies on the
company itself. Aldi would likely choose trucking as their preferred logistics mode since it is
relatively quick, has consistent scheduling, is widely accessible, and is less expensive than air

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freight and slower than shipping or sea freight. In order to create its goods under its own
brand name, Aldi buys large quantities of the materials it needs in advance, saving money
and extending its edge over other companies. Aldi Australia has its own brand, and thanks to
the unwavering services and quality they provide, they are able to draw customers back to
their stores time and time again. In terms of product life cycles, Aldi is currently in the stage
of growth because the company is already well known in the market compared to its rivals in
the retail industry.
In order to close the distance between the manufacturer and the customer, ALDI uses
the technique of direct consumer purchases from the producer. As per Ananthapavan et al.
(2022), this reduced the distributor's profit margin and gave the manufacturer the chance to
increase their profit margin. ALDI manufactures the items under its own brand and then
distributes them from a central warehouse to a specific superstore where the client may
purchase the item directly. In some circumstances, it buys from the wholesaler and stores it. It
has a transportation system of its own, which it uses to close the distances in space and time
between the manufacturer and the customers. As mentioned by Ananthapavan et al. (2022), to
engage with customers directly, ALDI maintains a few online services with the help of the
internet. Selection of the proper channel is another major factor in this case and it plays a
significant role in the success of the business. There are different factors which have
influence on the selection of the marketing channel and these factors are “market factor”,
“producer factor”, “product factor”, “competitive factor” and so on.
Market factor: Everything depends on how customers behave. Customers could have
certain expectations on how goods should be offered. The choice of channels is impacted by
geography as well. When a small number of customers purchase a high number of items, they
favour the "direct distribution channel". When choosing a channel, Aldi Australia takes the

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market into account. Here, a particular target client comes to purchase a huge number of
items, and they anticipate being able to choose the most affordable method of accessing those
things through a direct distribution channel.
Producer factor: The pricing and the producer's authority over the product both affect
the channel strategy. Aldi Australia adheres to the “direct distribution channel”, in which the
manufacturer has complete control over the quality of product, pricing, and resources,
including management resources.
Product factor: Specific product characteristics may call for specific handling from
channel intermediaries as well as customers. Aldi Australia does not give the product any
additional consideration due to its nature (Lewis et al. 2021).
Competitive factor: If the competitor controls the established means of distribution, a
novel strategy may be required to choose the channel. Aldi Australia opted for direct
marketing.
Despite the efficient operations of the marketing channels of Aldi Australia, it has
been seen that there are certain issues in the marketing channel of this supermarket chain.
These issues have been discussed here and the ways to resolve the same have been mentioned
as well.
Problem statement of Aldi Australia
Lack of product lines and infrastructure than competitors: As it has been discussed
earlier that the Aldi Australia stores offer nearly 1500 product lines whereas its competitors
like Woolworths and Coles have 20000 to 30000 product lines. Lack of product lines can be
considered as one of the major issues of the marketing channel of Aldi Australia and it
restricts them from acquiring new customers from the market. Apart from the product lines, if