Institute for Simplicity

Consulting Based on the Principles of Simplicity

Bare Essentials 2011

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The Book:

Title in Germany “Konsequent einfach. Die ALDI Erfolgsstory”. English title: “Bare Essentials – The ALDI Way to Retail Success”. Sold 100.000 times in Germany. Since 1998 on most of the Bestseller’s lists; sometimes No. 1.

Translated into Chinese, Korean, Portuguese, Dutch.

Facts on ALDI:

Together with Wal-Mart and Tesco ALDI is the top retailer in the world. Operating a limited assortment of only 1800 articles they achieve revenues of more than 77 Billion USD. Per single item they get up to 14 times the revenue Wal-Mart makes.

Since 50 years Karl and Theo Albrecht are following the mission which Karl once established: “Our only consideration when we are working out a product’s price is how cheaply can we sell it”.

Together the owners Karl and Theo Albrecht are the wealthiest men in the world. According to Young and Rubican, ALDI is the most famous brand in Germany since more than ten years – more famous than Coca Cola and Mercedes. According to German top managers ALDI is the best organized company in Germany (manager magazin).

ALDI operates 8000 stores in Europe plus and more than 1000 stores in the US and Australia.

Die Deutsche Bibliothek CIP-Einheitsaufnahme Brandes, Dieter: Konsequent einfach: die ALDI-Erfolgsstory / Dieter Brandes. – 4. Aufl., Frankfurt/Main ; New York : Campus Verlag, 1999 ISBN 3-593-35904-9


Preface (1998)

Preface (2011)

ALDI – a Portrait in Miniature

“Our only consideration when we are working out a product’s price is how cheaply we can sell it” 10   Less is better than too much 12   …. groping forwards in the dark like Albert Einstein 12   Confidentiality as a Principle 14   History and Growth 16   Clear Structures 15   ALDI’s Corporate Structure (North) 16   Financial Development in Germany 17   Good Grades from Consumers and the Trade Journals 18   ALDI and the Competition 20   “ALDI Is Where the Action Is” 21   Is the End of Growth in Sight? 21   ALDI and Wal-Mart: The World´s Top Retailers 22   ALDI and General Electric: Like a Pair of Twins – and just like Wal-Mart 24   Success Comes from Being Different 24

Part 1
The ALDI Corporate Culture

The Corporate Culture is the Key to Success 28   Unwritten Rules 28   Culture by Example 29   Asceticism as a Basic Principle 31   Frugality as a Guiding Principle 32   Promoting Managers from Within 33   No Gossip, No Scandals 34   Quiet Success 35   Best Regards from Mülheim 36   No Manipulation \u2013 No Tricks 37   Fair Treatment of Vendors 38   Customers Can Have Complete Confidence 39   Simplicity Is Not Easy 39   The Shortest Path to Recognizing Customer Needs 40   Providing Basics Well 41   Credibility 42   Uncompromising Quality and Product Range Policy 42   Dealing with Returns 43   Obsession with Detail: Small Triumphs Every Day 44   Theo Albrecht Draws Store Interiors 45   >From Mount Olympus into the Stores 45   An Interest in Detail or Rule Crazy? 46   Persistence and Strict Adherence to the System despite Daily Temptations 48   “Mistrust-Driven Management?”  49   Experiment Instead of Endless Analysis 50   The Secret, or the Art of Simplicity 52   The Question “Why?” 54   Shrewd Self-Restraint on Product Mix 55   A Source of Error: Cost Accounting 57   The Fear of Making Mistakes 58   What Is Special about ALDI Corporate Culture 59

Part 2
Organization and Leadership

Good Organization Offsets Poor Leadership 62   Leadership and Organization Determine Success 62   Only a Minimum of Communication 63   The German Company with the Best Organization 64   The Organization of an ALDI Regional Company 65   The General Manager Conference: Authoritarian Tendencies on the Increase 66   The Foundations of Good Leadership and Organization 67   Clear Goals Avert Conflicts 68   Dropping Mission Statements 70   More Similarity with Toyota than with Tengelmann 71   Kaizen at ALDI 71   Trial and Error 72   The \u201cThree-Store Tests\u201d’ 73   Personal Commitment and Passion 73   ALDI’s Reordering System: If it is gone – replace it 74   Decentralization and Delegation 74   Autonomy Means Less Complexity 75   ABB and ALDI: Decentralized and Successful 76   Delegation and Control 78   Delegation Means Sharing the Power 79   The “Harzburg Model” 80   Responsible Leadership and Responsible Action 81   “Supervision” and Controlling Results 83   Review of the General Manager 85   Practical Line Work Instead of Theoretical Staff Work 88   Creativity Requires Little Knowledge, no Data and a Bit of Ignorance 89   Excursion: Direction Product Profitability (DPP) 91   Focusing on the Essentials 92   Statistics and Internal Competition: ALDI’s Internal Benchmarking 92   Analyzing Masses of Data or Thinking Independently 94   Excursion: The Sense and Nonsense of Annual Budgets 96   Decisions on Specific Cases 98   The Executive Board 99   What Authority Does the Owner Have? 100   Special Features of the ALDI Organization 101

Part 3
Business Principles

The Five Principles of the ALDI Sales Policy 104   The Lowest Prices Anywhere 104   Price Wars 107   Quality Is More Important than Anything Else – Private Label Policies 108   The Number 1 Coffee 110   Quality Conscious Consumers 111   Rigorous Quality Control 112   600 Items Define One Company 113   The Toothpaste Philosophy 115   Less Is More 117   Success is Not Decided by the Purchasing Department 118   Excursion: Efficient Consumer Response (ECR) 122   Excursion: Category Management 125   Advertising Means Informing the Customers 125   Dealing with Vendors: Consistent and Fair 127   Improved and More Successful Negotiations 130   Only Cost Advantages Generate Price Advantages 131   The Fastest Cashiers in the World 132   Shoplifting 132   Store Interiors and Product Placement 133   Logistics 133   Bills of Service for Maintenance Workers 134   Personnel Performance and Productivity 134   The Principle of ALDI Stores 135

Part 4
ALDI Today: A Glimpse of the Future

From Discounter to Cult Object 140   Activities Abroad 143   Success of Hard Discount all over the World 144   The Outlook 146    Computers Are Elbowing out Beans 147   Will ALDI Remain Uncomprimising? 147