change retailers or substitute products. Buyers also have lots of information available, further enforcing their high bargaining power status. Lastly, the industry has fairly low profits available, so the power of the buyer is further augmented by this economic power factor. Aldi and similar companies compete by selling products at the lowest cost, with each player constantly attempting to reduce the cost even more. This ends up creating a high bargaining power for buyers. Threat of Substitution There is a high threat of substitution for Aldi and other retailers in the grocery store industry. This is due to the wide selection of products available, and the large amount of retailer stores present. Specifically tailored for Aldi, they purposefully compete with a low selection and …show more content…
Stores newly entering the market are forced to make decisions related to specialties and build up over time if they seek to offer a full range of products unless they have a lot of available capital for a startup. This is due to the concerning cost of real estate, shipment, and storing of food, low profit margins, and customer loyalty. They will lack bargaining power initially in this market, so it is also important to factor in the scale they will be competing on. However, there are low switching costs which favor the new entrant on their supplier side and they can further tailor the selection for the customers this way. Generally, smaller retailers can adopt a segment of the market such as meat and focus solely on that aspect while simultaneously threatening larger players. A primary threat facing this industry is the expansion of existing retailers to overtake company market shares or expansion of other market chains such as convenience stores or gas stations into the category. Currently Aldi is taking advantage of this facet of the market, expanding to 1750 stores across 35 states (Laura Gomez, May 8,