In 2004 Dieter Brandes leaked the secrets of
Aldi’s success in his book, Bare Essentials, that is now available on Amazon
for an amazing £196.90 a copy (it goes up and down) or maybe in an e-book format for a fraction of that
price. (There is talk of a new English edition soon.)
Don’t buy the book because you want to emulate Aldi as it is too late
for that. But do make sure you read it if you want to be a better retailer.
This is every bit as good as Sam Walton’s Made in America.
Brandes was a top manager with Aldi for 14 years
and marvels at how this secretive company’s simple formula was so widely
misunderstood by competitors. The formula for success was a surprise for its
founders, too. But Karl and Theo Albecht were astute business people who
quickly recognised how the money was made and then kept the discipline.
Put simply, the secret to making money is to
stock a tight core range and sell lots of every product. While Walmart sells
100,000 items, its average turnover per item is $3m. Aldi sells 700 items and
its average turnover per item is $63m. The Aldi way is not to play tricks on
negotiations with suppliers. It is simply to negotiate the best possible price
and build volumes. Its idea is to treat others as you would want to be treated
yourself.
The second part of the secret is to pay
attention to shoppers. Everyone has to think about assortment. Aldi is
constantly experimenting with its range. Adding three products in a group of
stores and then scaling up if they are successful. But always removing three to
keep the number of brands in the total assortment constant.
The third part is to be frugal. This comes from
the Albrecht brothers start in post war Germany. So Aldi never pays high rents.
Never hires consultants. It expects its line managers to handle hiring and
firing and training and sales analysis. It insists its top managers are in
store so they understand how the customers experience the company.
“The easiest way to judge the performance of
your own company is to buy your own products. For retailers, that means doing
their own shopping. They must become their own customers – shopping with a list
they have written at home and in a store where they are not recognised as a
senior member of staff. You only notice the important details when you yourself
are standing at the shelves.”
The fourth rule is fair behaviour towards the
customers. As Karl Albrecht explained in 1953 (his only public statement): “If
the purchase prices drop we lower our sale prices immediately – even if we have
yet to buy at the new prices. We take the position: offensive action is better
than defensive action.”
Or consider this. “When I was general manager in
Schleswig-Holstein, Theo Albrecht paid me a visit and together we went to one
of our stores in Niebull. Theo Albrecht found a package of three Mars bars
(sold for 98 Pf.) torn open on the shelves. He took one and went to the cash
register. The cashier, understandably excited by the presence of an important
visitor, demanded 50Pf. (one half instead of one third the price of the
multipack). When Theo Albrecht showed his surprise she responded by saying: “Mr
Albrecht when in doubt we always decide in favour of the company.” She meant
well…He then took the time to gently explain what he as a customer might have
expected.” He expected to pay a third.
There
simply is not room to share more of the great ideas in this book. You need to
read it for yourself. Translated from the German makes it slow going in parts.
But no less worthwhile for that.For more go to www.betterretailing.com.
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