My fascination with Aldi started about eight years ago. I was working with a friend as a freelance recruiter whose top client was Aldi. In the midst of helping him fill shift manager and store manager trainee positions, I started taking a keen interest at Aldi as a company. It wasn’t long ago that Aldi didn’t have a great reputation. They were known for cheap food and of course cheap prices. However, I had noticed a change over the years. Aldi was becoming a trendy place to shop. The quality of the food seemed to have improved significantly. It was then that I started asking, “Why is Aldi cheaper than other grocery stores?”
At the time, we were shopping at higher end grocery stores. The higher the price, the better the quality of the food, right? Well, not necessarily. There are a variety of reasons Aldi is able to keep their prices low. In this post we are going to focus on the three most significant factors that allow Aldi to sell quality food at rock-bottom prices.
Eventually, we switched from the higher-end grocery stores to Aldi. Our grocery budget was nearly cut in half overnight. While the selection at Aldi is more limited compared to larger grocery stores, they easily make up for that with their convenience and efficiency. If you’ve ever gone through a checkout line at Aldi, you know what I’m talking about.
Three Reasons Aldi is Cheaper than Other Grocery Stores
1) Most Items are Private Label
Advertising is expensive. Though in most cases if you don’t advertise how will anyone know about your product? Back when I was recruiting for Aldi, I remember hearing stories of how some of their products are produced. Some of the food would come from the same factories or even assembly lines as the name brand products. The macaroni and cheese that has the brand name label on the box goes one way and in the other direction goes the same macaroni and cheese with a private label.
It’s estimated that about 90% of the products sold at Aldi are private label. The genius behind the Aldi model is that they can still get people into their stores, largely based on their reputation of quality food at low prices.
Also, if you were to go and buy macaroni and cheese at a big chain grocery store, you’ll likely be presented with a dozen different brands to choose from. Therefore, companies have to focus heavily on their branding and advertising so you pick their product. That isn’t the case at Aldi. Instead, you’ll be presented with one or maybe two options for macaroni and cheese. Instead of staring at a shelf trying to decide which of the 12 options is best for your family, you just pick the one available and go.
When we started shopping at Aldi it did take some time to adjust to the more limited selection. However, we have been able to find most everything to meet our family’s grocery needs. All for a fraction of the cost of large supermarkets.
2) Few Workers and Higher Salaries
Paying your employees more seems to be counter-intuitive to having lower prices for the consumer. In some cases, that may be true but not in the case of Aldi. One of my favorite parts about recruiting for Aldi was how happy people were to find out their new salaries. Cashiers would sometimes go from minimum wage up to $15 an hour. Assistant managers would increase their hourly pay by $5 an hour. That can be life-changing money to some people.
At the same time, the higher salary comes with higher expectations. Aldi workers earn every penny of their extra hourly wage. You’ll rarely walk into an Aldi store and see an employee sitting idol. They are constantly on the move stocking shelves, cleaning, or famously moving people through lines at a record pace.
With all that said, the main reason why their staffing model helps keep costs low is because of the few employees on site at any time. A large supermarket may have dozens of employees working at any time. Aldi usually has three or four staff working at any time. This means that despite their higher salaries, the overall cost to Aldi is much lower than larger grocery stores.
3) Incredible Efficiency
Everything done at Aldi focuses on efficiency so they can pass the savings on to consumers. From their staffing model, to their use of energy efficient lighting, to their method to stock shelves, and so much more.
Two examples where Aldi is famously efficient is with their no bag policy and method for carts. If you visit an Aldi, bags do not come free. You’ll either need to scrounge up boxes available around the store from stocking shelves, purchase your bags at checkout, or bring your own bags. Most people appear to bring their own reusable bags, which not only keeps costs down from not having to pay baggers but also is good for the environment. Shoppers understand that the low costs come with some trade-offs and bringing your own bags is one that their shoppers are willing to make.
If you’ve ever heard someone talk about their “Aldi quarter” you know exactly what that means if you’re a regular. To use a cart at Aldi you have to insert a quarter to unlock the cart. While it may be a minor inconvenience to ensure you have a quarter with you for your cart, the tradeoffs are worth it. Unlike other supermarket parking lots, you’ll rarely see carts left in the middle of the lots where they shouldn’t be. It also means they don’t have to pay staff to bring carts back into the store because the customers do that.
These are just two examples of Aldi’s incredible efficiency. However, their methods around efficiency permeate through their entire operation. From the way food is produced at factories, to the way it makes it to shelves, to the extremely fast checkout process. Their focus on efficiency is another major reason why Aldi is so much cheaper than other grocery stores.
Why Is Aldi Cheaper Than Other Grocery Stores?
In personal finance one of the first things you can do to improve your financial situation is to reduce your monthly expenses. Outside of transportation and housing, food expenses usually rise to the top of the list. Our family of four spends about 40% less in grocery expenses shopping at Aldi compared to large supermarkets. Aldi is cheaper than other grocery stores primarily due to using private label (but high quality) food, their small staffing footprint, and their ruthless focus on efficiency. If you have an Aldi location near you I highly suggest giving it a try!