Lauren Cobello » Budgeting » Frugal Living » Why is ALDI so cheap?
I almost feel like ‘cheap’ is the wrong word. ‘Inexpensive’ is a more correct word I think. ‘Cheap’ can imply low quality, which is NOT true for ALDI. But, I’m splitting hairs. I get it. I digress. So, why is ALDI so cheap?
Their entire vision and mission revolves around one guiding principle: “Great quality shouldn’t come at a high price; rather, great quality should come with everyday low prices.” [Source]
A better way to think about it might be to put it in the form of a question: How can we make all of our products have the lowest price with the highest possible quality? When a question like that is motivating a company, they will look at everything differently, and we will save money.
Typical grocery stores are laid out to maximize the amount of time that you stay inside of the store. Ever wonder why the milk is located at the furthest place possible from the main entrance? It’s to keep you there as long as possible.
Everything about the layout and design of ALDI stores is focussed on efficiency (saving time and energy). Efficiency fro those who run the store, and for customers.
The boxes at ALDI are used for 3 purposes! Those boxes are used to ship the items, and also act as display – the employees simply rip off the front of the box and stack them for display. This makes shelf stocking simpler, faster, and easier. ALDI also does not give away shopping bags like pretty much every other grocery store. Most people bring reusable bags from home, which is better for the environment. Or you can buy them at a the register for like 6 cents a piece, or you can utilize the 3rd purpose of the ALDI boxes – grab an empty display box from around the store to use as your shopping “bag”.
Seriously, empty boxes at ALDI are pure gold. But it doesn’t just help the consumers. People using the empty display boxes helps the employees by keeping the shelves clean and reducing their waste.
ALDI stores are also smaller, so real estate costs are lower and utility costs are lower. They have High Efficiency lighting in many, if not all, of their stores. I know my local ALDI has solar panels covering their roof to help lower energy costs.
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Since there are fewer choices of products, more people are buying the same products. This means that ALDI can buy in larger volumes. So hypothetically, ALDI buys 1000 of their brand of mustard, giving them a volume discount. Instead of a typical grocery store that buys 200 of the expensive brand mustard, 300 of the middle-of-the-road stuff, and 500 of the cheap stuff. Larger quantities means lower unit price, for them and for you.
Personally, I’ve come to actually really appreciate the lack of choice. When I go to my other local grocery store to buy egg noodles, for example, I’ve got choices. There are 2 or 3 brands, plus the store brand. And each of them come in 3 different widths. Geez – I just need egg noodles! I’m not buying a car.
At Aldi, there are egg noodles. One type. That’s it. Take it or leave it. With basic products, lack of choice saves me a lot of time.
At least 90% of ALDI’s products are their own exclusive brands. Doing this cuts out the middle man, which saves you money. This also gives them more control of the quality of their products. They run all of their products through their test kitchens and adjust as they see fit.
Not that you’d need it, but since it’s their brand, they can offer a 100% refund plus replacement if you’re not fully satisfied. With only 1 brand of mustard to pick, your choices become easier and faster. Having their exclusive brands also means virtually zero advertising costs for their products. That savings is passed to you as well.
In my experience, ALDI is cheap on price, not quality.
Next time you’re at the usual non-ALDI grocery store, imagine how many employees are working at any given time. Figure 4-5 cashiers, 2-3 at the deli, 2-3 at the butcher, 2 for stocking, 3 for bagging, 1 for grabbing carts from the parking lot, a florist, a few bakers, and throw in 2 mangers. I’m at over 25, and I’m probably missing a few.
At my local ALDI, in the middle of the day, there might be 5-6 employees working at any given time.
Because of their efficiencies, they simply don’t need nearly as many employees. Shelf stocking is quicker with their display/packaging boxes. Their products have barcodes on up to 5 sides of the product, which makes scanning quicker. With people getting through checkout lines so quickly, there are fewer employees needed at checkout. Most ALDI stores have fewer than 10 employees total. Fewer employees means lower costs.
“Do you have your ALDI quarter?”
This is a common phrase around ALDI regulars. ALDI shopping carts stay locked up in their cart corral and you have to deposit a quarter to unlock one for you to use. After you’re done, just return it to the corral to retrieve your quarter. Since customers are returning their carts themselves, there is no need to pay an employee to fetch carts from all over the parking lot. This also keeps rogue carts from smashing into your car. Carts staying locked up means fewer, if any, of them “walk off”, which means they don’t have to pay for replacement carts.
Since customers supply their own bags, ALDI employees leave bagging to the customer. ALDI stores have a bagging area for customer to pack their own groceries. This also allows the checkout lines to go quicker, and removes the need for extra employees to bag for you. It’s an excellent trade-off.
If someone said to me, “Would you be willing to bag your own groceries and return your cart if it meant you can save $50 on your grocery bill?” I wouldn’t even hesitate.
So, why is ALDI so cheap? Because their entire business model revolves around reducing costs for everyone. To me, this is true customer service.
ALDI’s focus on lowering my grocery bill without sacrificing quality is the best way they can serve customers and make healthy food accessible to more and more people. Want to learn 13 secrets about ALDI you probably didn’t know?