Table of Contents
Introduction. 3
Macro Environment Analysis (PEST) 4
Discussion and Analysis. 5
Retail Store Branding. 5
Service Quality (SERVQUAL) 7
SWOT Analysis. 9
Challenges Facing Aldi 10
Recommendations. 11
Short-term (1-3 years) 11
Long-term (4-5 years) 11
Conclusion. 12
References. 13
 
 
 

Introduction

Retailing is a method of selling goods and services that is convenient, comfortable, and convincing. Retailing has evolved as it takes new marketing strategies, marketing techniques, and dynamic consumer psychology. Retailing involves a direct interaction between a seller and a buyer where business activities are coordinated from the design stage to product delivery to customers. Retail marketing, on the other hand, involves retailers promoting awareness of the goods and services they offer to generate maximum sales (Jayaram, J., Xu, K. and Nicolae, M., 2011). Retailers will use various strategies to advertise and communicate what they offer top their customers leading to profitability and a higher return on investment (ROI) (Phillips, J.J. and Marston, M., 2007). The retail marketing mix is guided by products offered, price, place, and promotion of goods and services. This paper aims to provide a retail marketing audit of Aldi concerning retail store branding and the SERVQUAL model.
Aldi is a family-owned discount supermarket which is chain operating worldwide and headquartered in Germany. (Aldi Recruitment – About Us, 2020). The retailer operates selling several goods such as grocery and electronics at discounted prices. The retailer has been in operation for more than 30 years and has a standard assortment in addition to special weekly offers such as electronics and other tools (Wortmann, M., 2004). Aldi sells its products at discounted prices, although the offers have limits on quantities (Wood, L.M. and Pierson, B.J., 2006). Some of the retail stores sell alcoholic beverages, groceries, and fresh products. The retailer uses unique strategies to reach out to its customers as it does use external advertising but a weekly newsletter called “Aldi informs” and is randomly distributed to stores and via direct mail (Voigt, K.I., Buliga, O. and Michl, K., 2017). To appeal the society’s different classes, Aldi has identified itself with the lifestyles. Besides, the retailer keeps its retail store branding by offering fewer stock-keeping units (SKUs). Customers tend to dislike having an array of many products to choose from (Cuc and Miina 2018).

Macro Environment Analysis (PEST)

The PEST analysis for Aldi examines external factors such as political, economic, social, and technological (PEST) that affect business tactics for the retailer.

Discussion and Analysis

Retail Store Branding

      Aldi retail store is committed to giving its customers high-quality products that have undergone rigorous testing and procedures for quality control at great value prices. The retailer maintains its brand reputation by keeping its costs low and through its excellent retail store branding(Aldi.co.uk. 2020d). Aldi mainly stocks its exclusive brands and ensures its products are tested to meet the national brand quality (Peters and Bodkin 2018). Aldi used its excellent selection of private brands to disrupt the grocery industry offering value, exclusivity, and innovation. The assortment of the brands had a direct growth impact of private brands as consumers discover they can buy quality private-branded products at Aldi at affordable prices. Offering outstanding private brands, Aldi has gained people’s trust, and more consumers get exposed to the retailer’s products (Kiran and Dilijit 2017).
Aldi established its brand in both low and high-income areas by investing in its increasing store count. The private-label offerings adopted by the retailer, including a broader organic meat product selection, expanded selection of products, such as natural and vegetarian products, helped the retailer move upmarket. Schmid et al. (2018) explain that Aldi has also launched a private-labeled wine line accompanied with gluten-free options for prepared meals. The retailer grew a loyal customer following keeping them within its ecosystem and protect margin. The retailer was also able to focus on its brands, which act as differentiators and appealing customers who desire sustainability and quality for products but are also conscious of the prices (Ramanthan et al. 2017).
In the recent past, Aldi gained an excellent reputation due to the promotion of quality private brands together with its economical prices. Aldi has not only raised its reputation among consumers but also profiles of several private brands. Aldi quickly grew its chain stores to become a stiff competitor and bringing bout disruptiveness in the grocery industry (Kotler and Armstrong 2010). In the past decade, the retailer ramped up its market presence choosing frugality over name brands. This growth was attributed to its ability to offer products that are of better quality and innovative, resonating with all customers (Grewal et al. 2013). The shoppers base for Aldi magnificently blossomed to 40 million customers monthly by targeting a more extensive income base, particularly households whose income lies between $30,000 and $99,000 (ALDI: A private brand powerhouse, 2020)
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Aldi strengthened its retail store branding by differentiating itself from its rivals through innovation. Differentiation began in 2014 when the retailer launched the first-ever store-brand gluten-free category of products known as liveGfree line (Murray et al. 2018). The retailer also put out another store brand known as SimplyNature, which featured natural and organic products that were made from “true ingredients.” The retailer in 2015 went on to get rid of partially hydrogenated oils, synthetic colours from its brands’ products. Aldi later launched a private label line of baby products such as organic infant and toddler snacks, formula, diapers, and wipes known as Little Journey. Then in 2016, the retailer introduced “Never any!”, a private brand that featured products made without adding any hormones, antibiotics, animal by-products, and steroids (Nyadzayo et al. 2018).
Recently, Aldi expanded provision of private brand fresh products in its stores offering more ready to cook fresh organic products such as farm produce, meats, and vegetables, grab-and-go items such as baked products and refrigerated beverages. Cherney and Hamilton (2018) explain that exclusivity at Aldi has been a result of innovation. Exclusivity was evident in some of the products that were available at Aldi and nowhere else. Therefore, customers flocked at the retailer to purchase the products since no other store had them. For instance, Aldi sold its zesty Italian meatless meatballs under its Earth Grown vegan brand, sold its bacon smoked sausage and bourbon whiskey under its Parkview brand, among other products. Additionally, Aldi sells private brand lines of several products, including Friendly Farms milk and dairy products, Clancy’s snacks, Sea Queen seafood products, among many other beverages, foods, and non-food items (Hitt et al. 2017).
Aldi has always used the “no-frills approach” in its business to strategically keep its prices lower by removing non-essential features. Gehard and Hahn (2005) explain that by lowering product prices, customers can shop more conveniently according to their budgets. Aldi offers few product choices reducing the overhead and allowing them to sell their products at much lower prices. The store has built solid relationships with its suppliers by partnering with the best food manufacturers in the country to ensure high quality and constant product innovation (McIntyre et al. 2016).

Service Quality (SERVQUAL)           

An organization’s relevance in business is enhanced by its service quality to customers. According to Zeithaml 2018), the SERVQUAL model is a conceptualization for measuring the quality of services offered to customers. The outcome of a comparison between the expectations of a customer and the actual service value offered gives the service quality. Aldi emphasizes service quality as an essential part of its customer’s perception; it determines the level of customer satisfaction. The service quality offered at Aldi stores is the ultimate determinant of customer satisfaction (Cavana et al. 2007).
The level of service quality at the retailer is high; hence an equivalent level of customer satisfaction. Aldi grocery stores follow the five dimensions that appertain to service quality. The first dimension at Aldi is related to tangibles, which refer to the physical equipment and facilities at the retailer (Kasiri et al. 2017). Aldi offers its customers high-quality products. Secondly, reliability at Aldi is seen in the retailer’s prices, product and service delivery, the providence of quality service, and problem-solving for customers. The retailer offers high-quality products and services at affordable prices and helps customers get what they need. Thirdly, the retailer puts into place responsiveness by supporting customers through fast and efficient service facilitated by communication between the firm and the customers. The fourth dimension if assurance and is conceptualized at Aldi through the vast employee understanding and willingness to satisfy customer needs. Through continuous customer assurance and satisfaction, Aldi has created a trust relationship with its esteemed customers. The final dimension of service quality is empathy; employees at Aldi show care and pay attention to customers’ needs to enhance their shopping experience (Yang et al. 2019). Employee communication and behaviour at Aldi is designed in a way to meet the customer’s requirements while considering their feelings as they try to solve customer problems.
The ultimate result of the five consumer perceptions of service quality in conjunction with product quality and price is customer satisfaction. Wilson et al. (2016) explain that the service quality at Aldi is designed to fill the five possible gaps that would occur between expected and delivered service quality. The first gap which could occur as a result of the management not knowing the demands of their customers is overcome by familiarizing every member of staff with the store’s information. The second gap could occur by giving wrong service guidelines. Aldi overcomes this gap by ensuring sufficient commitment to improving service quality. Thirdly, a gap could arise in the case of a difference between performance and specifications (Ngobo 2017). Aldi has addressed this by making sure there is certainty in employee roles to avoid conflict. The fourth gap occurs as a result of undelivered promises. Aldi ensures no promises go undelivered by facilitating clear communication between employees, customers, and through adverts. The final gap could be a result of customers having expectations of service quality that are different from reality. Aldi addresses this by clearly outlining the service quality offered to avoid disappointments (Beneke et al. 2012).

SWOT Analysis

The SWOT analysis plays the role of a strategic tool that can be used by Aldi’s management to understand the organization’s strengths, weaknesses, opportunities, and strengths. The data can then be used to do a situational analysis of the organization’s business environment.

Challenges Facing Aldi

• The European food industry is as competitive one. However, despite the competitiveness, it is important that businesses stay on the radar to provide their customers with high quality products at favorable prices (Wu et al 2014).
• Just like most organizations in the retail food industry, Aldi needs to understand its customers’’ needs. Aldi faces the threat of new entrants in the market since entry is fully controlled by a country’s economies of scale.
• In the United Kingdom, Aldi faces the challenge of a relatively high bargaining power within the industry. This power makes it had to switch possibilities from one store to another due to the high costs. Suppliers would therefore have to improve product quality and reduce costs to give Aldi the power of choosing the most favorable and reliable supplier (Schmid et al 2018).
• Several emerging grocery stores pose the threat of substitution in addition to the stiff rivalry within the existing market.
• Aldi faces the issue of competition from its rivals due to technological advancements that it is yet to embrace. Upcoming brands with strong technologies are in a position to overthrow Aldi’s private labels.
• Aldi still lags behind when it comes to online payments hence requiring customers to wait in long queues to make their purchases.
• In addition, the retailer limits the products it offers thus inconveniencing consumers who would want to have a more inclusive shopping experience. Aldi uses minimal space in stocking its products as part of its core strategies to increase lean production (Cuc and Miina 2018). However, using smaller store space poses as a challenge for the firm since it can only serve a specific number of customers at a time.
• Finally, Aldi is excited about investing in new markets. However, it is essential for a company to look into and establish a customer base before actually expanding into a new market that requires new customers.

Recommendations

Short-term (1-3 years)

• The retailer should also consider offering competitive prices as one strategy of positioning themselves as the market leader. This strategy will facilitate penetration of different markets by the company.
• Aldi should also adapt new technologies available in the market as a way of increasing its competitiveness. The level of income will be increased by adopting latest technologies and the store’s operational efficiency will increase. Aldi should allow online payments to save customers’ time that would otherwise be spent in long queues (Wilson et al 2016).
• It would also be advisable for the company to assess its tangible resources such as finances to minimize the cost of operation.

Long-term (4-5 years)

• Aldi should consider expansion as a strategy for increasing price and accessibility to all its chain stores; this is a useful factor that will help the retailer to strengthen its presence in the market and increase its market share.
• Aldi should also consider strategically constructing its stores in locations that are fully accessible as a strategy of increasing consumer preference.
• The firm should also consider amending its infrastructure to increase space so that customers have more shopping space. The store should also add more items to its supermarkets to allow customers a more inclusive shopping experience (Cherney and Hamilton 2018).

Conclusion

Aldi is a leading grocery store that has its grassroots in Germany and serves the U.K. the retailer has incorporated a number of strategies to remain relevant and competitive in the industry. A PEST analysis is given for Aldi to determine the factors that affect its relevance in the industry. Factors that influence retail store branding at Aldi are discussed with special focus on Aldi’s private brand promotion. The service quality (SERVQUAL) analysis is given for Aldi and how the firm overcomes the five gaps that hinder business. The organization’s SWOT analysis is also conducted to identify the company’s areas of weakness and opportunities available. Challenges facing Aldi are addressed and recommendations on how to overcome the challenges are given.
 
 

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