Aldi's 'No Frills' Approach Is Helping It Dominate The US Market

Aldi has been growing at a rate of about 100 stores per year since the 2008 recession. In 2023, though, it has added an additional 120 stores — and in 2024, with Aldi's acquisition of Winn-Dixie and Harvey's stores, it will grow by another 400 stores in the Southeastern U.S. alone. According to a report from dunnhumby, Aldi has gained control of 2.1% of the grocery retail market — just 0.3% less than Dollar General, which opened nearly 20 years before Aldi landed in U.S. markets.

It's still far behind the top grocery chains in the United States: Walmart owns 18% of the market, Costco has 9%, and Kroger has 5%. But with the biggest and fastest growth rate of any grocery chain in the country for four consecutive years, Aldi is gaining on them and attributes its ability to scale up in the market quickly to its efficient, no-frills business model. "It's about simplicity, and it's about efficiency, and it's about a consistent experience all the time," Aldi President Dave Rinaldo told the Wall Street Journal.

That no-frills approach has allowed the company to keep prices down for consumers, who are choosing the bottom line prices over name brands and traditional retail marketing tactics like inflating bags of chips to make them seem fuller. Aldi avoids these psychological tricks in favor of fitting more stock on shelves, meaning less restocking and fewer restockers. The lower operating costs make it much easier to open new stores and grow like crazy.

Aldi's focus on bare-bones efficiency is all in the name of optimization and lower cost to the consumer. It's easy to staff with lower labor costs from shorter operating hours and a value-branded expectation of little in-aisle customer service; it's also easy to stock with its simple in-package displays. Plus, the stores are smaller and uncomplicated, so the cost of initial real estate investment, utilities, and upkeep is lower than other stores. That efficiency is what gives it an advantage over other stores.

It takes a lot more resources to keep a 148,000-square-foot Walmart store running than it does to run a 22,000-square-foot Aldi. The typical supermarket carries about 31,000 products. Aldi, however, only stocks about 1,600 products, and most of them are private-label products with good margins at lower prices than name-brand items. Aldi doesn't even play music in its stores, so it doesn't have to pay licensing fees.

With all of these efficiencies that make Aldi stand out among grocery chains, it's able to offer its products at a much cheaper cost to the consumer than the national average. And in times when inflation and the cost of living are putting pressure on shoppers, Aldi's brand thrives not just among low-income shoppers but among households earning $100,000 annually and above. In 2022 alone, Aldi claimed that it acquired 9.4 million new customers. Going into 2024, there's no sign of slowing down.