Institute for Simplicity

Consulting Based on the Principles of Simplicity

Impossible but true: ALDI without profits

Artikel vom 03.04.2018

In the past, ALDI was a role model with its disruptive business model and its consistent and disciplined management. This led to the highest profits amongst grocery retailers. Today, ALDI is becoming a role model for leaving its convincing and proven business model behind and consequently generating losses. 

The German business journal „manager magazin“ reports in its newest edition (4/2018) how pretax profits of ALDI South in Germany have dropped from 3,6 % in 2016  to 1,7 % only in 2017. In December, profits even turned into a loss of -2,87 %. For 2018, the management of ALDI South expects to follow the same trend. 

The reasons for this surprising development are obvious. They can even be observed in TV spots. ALDI today works just like any other normal company. ALDI does promotions and special offers with brands like Nivea and launches image advertisement in addition. ALDI even has a marketing department. In the past such a department  was unknown to ALDI. If at all, ALDI did simple flyers or advertisements in order to inform customers about items, quality and prices („ALDI informs“).  

In the past, ALDI decentralized and delegated where ever this was possible. The organization was a foolproof line organization, without any staff departments. Today, one is preparing for an „even more centralized“ organization (manager magazin).

In the past, ALDI worked with the highest productivity and only the most necessary staff. Today, the excessive growth of the assortment, centralization and staff departments have resulted in twice as much personnel expenses and the first announcements of its management that job will be guaranteed. 

In the past, ALDI focused on its private labels which were of equal quality than the famous brands or even better. Today, ALDI adds more and more brands, sells therefore unnecessary redundant items and becomes more and more similar to competitors in regards to its assortment. 

In the past, asceticism and extreme austerity were major characteristics of the ALDI corporate culture. Job descriptions highlighted that the economic principle has to be applied in an extreme way to everything. Today, the Managing Directors of regional companies have to be reminded to be cost-conscious. 

In the past, the regional Managing Directors initiated the savings which made ALDI to become the retailer with the lowest expense to revenue ratio and helped generate  highest profits of the industry. As an important part, controlling the regional companies and checking on each store was an important task of all top managers and ALDI´s daily bread. 

ALDI is leaving behind one of the most admirable and successful business models and an undefeatable corporate culture. ALDI is heading to become just an ordinary  company with very ordinary results, including losses sometimes.