Marketing Plan ALDI. Entry into the Finnish Grocery Retail Market

Table of Contents

1 Introduction

2 Marketing Plan
2.1 Self-Analysis of the Retail Company ALDI
2.1.1 Key Features of the Business Model
2.1.2 SWOT Analysis
2.2 Situation Audit of the Finnish Grocery Market
2.2.1 Market
2.2.2 Competition
2.2.3 Environmental Factors
2.3 Retail Marketing Strategy to enter the Finnish Market
2.3.1 Target Market
2.3.2 Retail Offering
2.3.3 Competitive Advantage

References

1 Introduction

The ALDI group is a German chain of grocery stores and can be traced back to the Albrecht family from Essen, whose first store opened in 1913. Thus, the family-owned company looks back on a long history in retailing, in which it was an important part of the success early on to go new and innovative ways. As early as the 1960s, the company introduced the principle of self-service stores, and even today the company is known for reducing service and offerings to the essentials (ALDI Nord, 2021c). ALDI Group stores are discounters where customers benefit from low prices and reliable quality (ALDI Nord, 2014). Since the company has been managed by the Albrecht brothers Theo and Karl junior since the 1950s, there is a division between ALDI Nord and ALDI Süd in the German market (ALDI Nord, 2021c). ALDI is also active internationally and spreads its business concept not only in European countries but also in the USA, Australia, and China. While within Germany the availability of ALDI Nord and Süd changes in the middle of the country, the international allocation is less intuitive. The Scandinavian countries are fittingly within ALDI Nord's area of responsibility, but so are southern countries such as France, Spain, and Portugal (ALDI Nord, 2021b). All stores in non-European markets are managed by ALDI Süd (ALDI SÜD, 2021). Since the business model and product range of the formally separate companies do not differ significantly, no distinction is made between ALDI Nord and Süd in the following.

2 Marketing Plan

2.1 Self-Analysis of the Retail Company ALDI

2.1.1 Key Features of the Business Model

As a discount retailer, ALDI limits its offering to the essentials. This means a limited assortment but permanently low prices for the customer (ALDI Nord, 2014). The concept aims for high quantities and the resulting economics of scale and uses simple presentation of the goods in their boxes instead of laboriously placing them individually on the shelves. Another cost-cutting factor is that no more employees are employed than are necessary (Hielscher & Dummer, 2016). Outside the individual stores, optimized logistics and close business relationships with suppliers support the concept and at the same time ensure high reliability of the supply chain at low cost (ALDI Nord, 2014). ALDI customers may be used to longer waiting times at the checkout, but beyond that, high value is placed on reliability and quality. As the German market leader in food retailing, the brand is known for its successful low-price strategy and proven quality. And ALDI is sure of its promise of quality. Part of the service is particularly accommodating behavior when exchanging goods should something not be as good as expected (Hielscher & Dummer, 2016). The company also enjoys a good reputation among customers thanks to its close-knit store availability, and its own brand is one of the best-selling products in the German retail sector (ALDI Nord, 2014). Customers can buy the same items in all stores, and in most cases even the store layout and product locations are identical (Hielscher & Dummer, 2016). This makes for familiar impressions and is even largely maintained by the company internationally. Despite this approach to ensure the same offer everywhere, there are regional differences. Particularly abroad, ALDI shows itself to be adaptable. Regional eating habits are reflected in the assortment of foreign locations. A different positioning in the market is also conceivable in principle; in China, for example, ALDI is known as a premium grocery retailer. Identical to the European stores is still the reputation of high quality (Petring, 2021).

But how can ALDI's business model be analyzed in more detail and where are its strengths and weaknesses? To shed more light on this and form a basis for later recommendations, a SWOT analysis of the discounter is carried out below.

2.1.2 SWOT Analysis

Strengths

ALDI's strengths are closely linked to the key factors of its business model.

One obvious strength is the ability to offer its customers permanently low prices across the board. This is based on two other strengths. On the one hand, the company has efficient logistics and merchandise distribution between its suppliers and stores. In addition, ALDI can negotiate particularly low prices due to its size and purchase volumes (Hielscher & Dummer, 2016).

Another strength is the ALDI brand itself. Across Germany's borders, the retailer is known for low prices with reliable quality, and private label products are appreciated by customers. ALDI is not only the overall German market leader in food retailing, but also the most popular supermarket among young customers (ALDI Nord, 2021a).

Although ALDI started with a very limited range of goods, today the assortment includes about 900 items in the food as well as non-food area (Hielscher & Dummer, 2016). Here, both the low-price range is covered by private labels and the product portfolio is supplemented by premium brands or organic products. This means that customers with different budgets and consumption needs can find what they are looking for at ALDI.

What stands out at ALDI is also the quality, which is constant, as are low prices. Even though the assortment has grown to 900 items over the years, the offer is rather limited compared to other grocery stores. This allows a very conscious selection of goods to take place and unsatisfactory products are quickly removed from all stores. In addition, ALDI's large sales volume also offers advantages here, as the average turnover rate of 8.5 days automatically means that there are always fresh goods on the shelves (Hielscher & Dummer, 2016).

Weaknesses

The concept of offering the same range of goods in all stores also has disadvantages. For example, ALDI is dependent on the availability of high minimum quantities when selecting suppliers, and the organizations for distribution to all stores are very complex. Especially popular promotional products that are intended to attract customers to the store should not be sold out too quickly.

Saving staff and limiting the offer to the most necessary also has disadvantages and these are that customer satisfaction can suffer (Hielscher & Dummer, 2016). Successfully managing costs and the shopping experience is a constant challenge in this segment.

Positioning oneself as a supplier with permanently low prices means low margins and being dependent on high sales volumes. This works well in Germany with a high market share but can have a negative impact when entering new markets.

Opportunities

ALDI makes high profits in its established markets and can reinvest this money to grow further. On the one hand, investing in real estate instead of renting buildings lowers costs (Hielscher & Dummer, 2016). In addition, the money can be used for the expansion of the store network in existing markets and the development of other countries. This reinforces the economies of scale and market power from which the company benefits greatly.

The success in Germany as a country with a high standard of living and high incomes leads to the logical conclusion that the concept of low prices at good quality can also work in other countries. ALDI already operates very internationally, but emerging countries have hardly been developed so far and offer great potential for products with the quality promise "made in Germany".

Threats

Nationally and internationally, ALDI is in direct competition with the discounter LIDL. The mutual competition for customers leads to further price pressure in order to be able to fulfill the promise of the lowest prices (Deutsche Welle, 2019).

Retail is in a state of flux where new technologies and customer demand for high convenience and a special shopping experience are constantly on the rise (Sorescu et al., 2011). ALDI is in danger of being perceived as inconvenient if the level of service is too low compared to the competition. Especially compared to premium retailers that offer home delivery, possibly automated and cost-efficient in the future, there are big differences.

2.2 Situation Audit of the Finnish Grocery Market

2.2.1 Market

Finland is a large country in terms of area, but only with a population of less than 6 million people. The highest population density is in the south of the country, especially in the Helsinki metropolitan area and near the cities of Turku and Tampere (Maps-finland, 2021). With comparable size of Germany and Finland in terms of square kilometers, the population of over 80 million people in ALDI's country of origin alone shows that the population density is much higher there. As in most Nordic countries, this poses a challenge for retailers in Finland, as volume sales have a significant impact on logistics efficiency and therefore price and availability of products (Finnish Grocery Trade Association, 2021).

In the last 25 years, the number of stores in the Finnish retail sector has fallen by more than two-thirds, from around 10,000 to 2,800 (Finnish Grocery Trade Association, 2021). This is also because fewer large stores are more cost-efficient to run than many smaller ones. The Finnish food retail sector has been growing steadily in recent years and was worth 20.2 billion euros in 2020 (Clausnitzer, 2021b). If you put this turnover in relation to the number of Finnish inhabitants, you get an attractive market. In ALDI's country of origin, Germany, sales in the food sector are 7 times higher with 139 billion in 2020 (Ahrens, 2021a)but the population is about 15 times higher. Also, the average grocery shopping basket in Finland was worth about 22.8 euros in 2017 (Clausnitzer, 2021a) while in Germany it was worth only 15.4 euros in the same period (Koptyug, 2021).

The retail trade knows differences in assortment and sales depending on the season. December is traditionally the strongest month with Christmas business (Ahrens, 2021b). However, this applies most to non-food items such as fashion or technology products and less to food. Nevertheless, there is a desire on the part of customers for seasonal products and popular promotional merchandise, for example during the Christmas season, can increase sales.

2.2.2 Competition

The competitive situation in Finnish food retailing is that of an oligopoly, with the S-Group with 46% market share and the K-Group with around 37% market share by far the largest suppliers. In third place is the German discounter Lidl, which only entered the Finnish market in 2002, with a share of just under 10% (Finnish Grocery Trade Association, 2021).

This form of competition means that the individual companies have a strong position in the market, and it can be difficult for potential market entrants to build up a comparable or at least competitive structure (Economics Online, 2021). In food retailing, efficient logistics are of great importance so that fresh goods can be transported to the stores on time and at a reasonable price. The structure of Finland with a large land area and often low population density reinforces this, as distances are quite long. Existing retailers can leverage their large store network

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