Michael Girdley explains why Aldi terrifies Walmart. Aldi carries only 1,400 products, over 90% private-label, priced 15-20% lower than competitors. Because it controls its entire supply chain, traditional grocers can't match its costs without dismantling their whole business model.
Walmart is not scared of Amazon or Target at all, nor your local grocery store. But there is one company that terrifies them, and that company is Aldi. 1976, Aldi had come from Germany to open its first store in the United States in Iowa, and the place was freaking weird. There were no branded stuff, you had to put in a quarter to get your grocery cart, and you had to bring your own bags. Customers didn't get it. But what Aldi was doing was actually deploying a business strategy called counter-positioning. That's where you take what your competitors do and you flip it on its head so you can win. And in this case, Kroger, our Kroger grocery store might be having 30, 40, or 50,000 items inside of their stores. Aldi, on the other hand, cuts all the costs out and only carries 1,400 items. If Kroger wanted to offer that few amount of items, they would kill their relationships with all their existing customers. They literally could not compete with Aldi on this stuff. And because Aldi also makes over 90% of its products as private label, it means they control the entire chain of how stuff gets into their stores. A Kroger is dependent upon the people that own things like Kraft mac and cheese, Coca-Cola, and all those brands. So while those items are often made in the same exact factory as the branded items. They show up in Aldi and are sold for 15 to 20% lower priced than at Walmart. And that's why Walmart's terrified. Imagine you build your entire empire on decades of being the low-cost leader for American consumers, and suddenly somebody walks in and is pricing stuff 15 to 20% cheaper than you are. And in Walmart's case, in Kroger's case, there's nothing anybody can do about it. And Aldi has ridden this advantage to become the number 3 largest grocery store chain in America by store count. I did a long video on the entirety of how they did it. You can find the link to it in my bio or in the comments below.
