Aldi Porter's Five Forces Analysis

“Simply Smarter Shopping” is something all consumers are on the search for, with onlyone competitive grocery chain providing that type of guarantee: Aldi. Aldi is a fast growingchain of grocery stores centered around the core values of clarity, simplicity, and unmatchableefficiencies. Aldi stands to its commitment to the people, customers, and the environment theyimpact as a business. Not only is Aldi a conscious/responsible player within the industry, but thetrue value of Aldi is revealed in its core business model of keeping prices well below marketvalue (average prices within the industry) as well as providing ample customer service to supporta growing client base. This focus on efficiency and social responsibilities is what has broughtAldi

Porter’s Five Forces include bargaining power of customers, threat ofsubstitution, bargaining power of suppliers, threat of new entry and rivalry. When consideringthe bargaining power of customers one must always first look at the number of customers, size ofeach order, switching cost and the difference between competitors. Retail stores especially likeAldi, stay in business by selling its products at the lowest possible cost to bring in morecustomers and to keep loyal ones. The bargaining power of customers at Aldi is very strong,there are many other options out there; most grocery stores and supermarkets are placed veryclose to each other and the customer wouldn't have to go far to switch to a different store. Assoon as Aldi starts to raise prices they come closer to their competitors price so they can't, thebargaining power is with the customers. When considering the threat of substitution one mustaccount for the availability of the substitute, substitute performance, cost of the substitute andswitching cost. The products that are sold at Aldi stores are not unique and are sold at othersupermarkets located nearby, they are generic brand food items. Therefore, the threat ofsubstitution is strong for Aldi. The only part that works in Aldi’s favor is that when presentedwith more choice, the customer has a hard time choosing; for example, Aldi purposefully onlyoffers two types of ketchup, and it helps customers choose and actually spend money.

Assuch, paying in-store shouldn’t be an option, and any in-store pickup should require prospectivecustomers to make the transaction prior to finalizing the pick-up order. This would allow thestore to finalize the order more quickly, and cut down on any potential losses from no-showcustomers. It’s also important to note that ALDI tends to keep less staff on per shift thanvirtually any other grocer, and additional staff may need to be hired should this service take off.And while this type of service could be implemented at no additional cost, coupled with the factthat ALDI charges a (very small) fee for basic utilities such as grocery carts and plastic shoppingbags, it’s not unreasonable to imagine that not many would complain should ALDI decide tocharge a premium for this service. ALDI stores function as finely-tuned, efficient machines, andadding the option of in-store pickup should only contribute to its reputation as such.Implementing in-store-pickup into Aldi’s services will give the company competitivepower in the grocery store industry among rivals. According to NCR, a global technologycompany, “a survey of grocery retailers in North