How do you get growing again?  One model to study comes  from ALDI, the Batavia, Illinois based grocer.  Part of the German ALDI company, the U.S. division is completely independent.  Now open in 29 states, with over a thousand stores, ALDI is a good example of Value Innovation in action.  They have taken a commodity, low margin business and pinpointed a way to deliver exceptional value.  How are they unique?  Consider:

1.  They only offer about 1,200 SKU’s vs. the 25,000 found in today’s typical grocery store. By limiting their product array to the most important core items, they drive volume for the products that count the most, dramatically reducing real costs.  They pass the savings along to their customers.

2.  80% of their products are private label (“own brand”). They have found that most consumers are ready to make the move from national brands because the “quality” stigma has disappeared.  In fact, ALDI has invested heavily in their own test kitchens where they test every product six times per year to ensure high quality.

3.  They let customers do much of their own work to help keep their rates low. From cut case/pallet merchandising to “rental” grocery carts, the focus is on keeping operating costs low in order to keep customer prices low.

ALDI’s initial U.S. focus was on the low-income shopper.  But their products have continued to improve and move more upscale.  The hard work is paying off for ALDI as they are now reaching an average customer with $65,000 HH income.  Their growth suggests that when the economy is healthy, they do well.  But, when times are tough, they even do better.  ALDI creates real value for customers at a lower cost while attracting new customers with their unique offering.

Here’s a look at a recently opened store in Chicago and it’s importance to the revitalization of a part of the city hit hard by the recession.

ALDI, Blue Ocean Strategy, Grocery, value innovation