Institute for Simplicity

Aldi (and partly Lidl) have given the established retailers in Great Britain and Australia a hard time. The question was always when does Walmat in the US start suffering. They already made their experience in the UK where life got pretty miserable for Asda. Now Walmart gets attacked in their american home market. Their claim „Save money. Live better“ is at stake. Apparently Walmart is not so much a discounter as they always seemed to be.

The German Lebensmittelzeitung announces now that „the retailer will reduce prices on their american home market in order to attract customers again.“ Walmart´s price reductions proof that their prices had been too high.

Like other supermarkets, Walmart has always considered how high a sales price could be set. Aldi has always followed the principle: How low can we set the price? A fundamental difference between the business model of a discounter and a traditional supermarket like Walmart.

Aldi achieved the ability to always offer the lowest price because of its business model of a limited assortment. This led to highest productivity and lowest cost. Walmart is now trying to improve cost by putting pressure on suppliers and will need to consider what its business model really is. The world´s largest retailer operates 63 banners in 23 countries. The simple idea of offering more for less has become as complex as the assortment of hundred thousands of items. Aldi has to manage only one banner and a couple of thousand articles. It all comes down to the business model and complexity.