The labels and offering a small number

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The aim of this report has been to exemplify
the strategic profile of the discounters Aldi and Lidl. The first part of the
report argues their generic strategy along with the objectives and strategic
focus of being cost leaders with a vast growth potential in the British market.

However, as seen throughout the report,
the discounters are enhancing their price oriented strategies with highlight on
product quality and value for the money. Lourenço, C. and Gijsbrechts, E. (2013)
argue that “Hard discount chains have realized that growth strategies based on
prices are not without limits, and that an overreliance on price-based
competition makes them vulnerable to incoming discounters”. This the reason why
both Aldi and Lidl are moving into e-commerce and multi-channel strategy.

As presented in this paper, it can be
concluded that Aldi’s and Lidl’s strategic profiles show a great proportion of similarities,
continuously aiming on keeping low prices, accentuating the quality of their
own brand labels and offering a small number of store keeping units per product
line. (Aggarwal, 2003)The
promotional activities of Aldi have been transformed once they entered the UK
retail market. Aldi’s policy of limited advertising in Germany, has been
altered into advertising on mass media in the UK. Aldi’s promotions have been
extensively introducing TV advertisements such as the “Like Brand”
campaign featuring TV adverts which are focusing on specific products. Through
this campaign Aldi reinforces the message that their products are cheaper than
other brands however they are equal in quality. They represent diversity as
well as humor which helps them build trust and emotional connection with the
target audience. Additionally, Aldi uses leaflets within stores which displays products
with limited availability and seasonal offers available in stores. The Swap and
Save campaign proves the target audience how much they could save if they
swapped their weekly shopping to Aldi. Moreover, Aldi is present on social
media channels, Facebook and Twitter pages through which platforms they
increase the outreach to their target market. Aldi also uses direct emails communicating
variety of seasonal messages. Aldi’s represents the fundamental part of their
below-the-line promotion.

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When
it comes to above-the-line, online display and direct mail advertisements, Lidl
has been the leader advertising spender during 2016 and 2015. (Mintel, 2017). Midst
January, Lidl launched their “Big on quality, Lidl on price” campaign, with the
intention to reinforce their position as a high-quality brand. This was a
continuance of their quality positioning followed by their Lidl Surprises
campaign launched in 2014. Collectively, the two leading discounters Lidl and
Aldi accounted for 88.6% of the total recorded above-the line, online display
and direct mail advertising. (Mintel, 2017)Aldi and Lidl hyped the price
aggressive discount format by continuously increasing their market share in
different parts of Europe and the United States. (CITE)The two discounters have permanently
changed the dynamic of the grocery retail market by forcing down margins. The
low prices are built in their initial business model. (Gale, 2017) The combined
impact of Aldi and Lidl on the general price sensitivity becomes larger,
putting extra pressure on incumbent competitors such as Sainsubury’s, Tesco,
Morrisons to also decrease prices. (Hausman and Leibtag, 2007)”ALDI practices an important type of good-value pricing at
the retail level called everyday low
pricing (EDLP)”. (Kotler
et al.2017, p.327)By employing the “Everyday low pricing”
strategy Aldi and Lidl have managed to introduce innovation in the UK grocery pricing
by representing a point of differentiation from the competitors. The strategy
has reduced their costs of running irregular discounts.Besides the previously mentioned
strategy, other commonly used pricing strategies by Aldi, include:·      Competitive
pricing- Aldi always places their prices lower than the competition.

·      Market
penetration- Aldi charges low prices for their products as a strategy to enter
new marketplaces and gain significant market share.Aldi’s approach concept of limited
assortment of fast moving products. So, the company typically use two similar
brands for all category of the product. Aldi own brands accounts for around 95%
of all stock and the rest are national brands (Mintel, 2017). This structure
allows the supermarket to have a large range of products but less variety. The
product range includes, food items such as fresh produce as well as frozen
produce, wines and non-food items such as health and beauty, clothing,
household products and small electronics. If we now turn to Lidl, it can be
observed that the stores showcase their private label products or products from
less familiar brand. Lidl stores allocates almost 20% of their store area to
the sale of non-food items, such as electronics or household products. In-store
bakery departments represent a point of difference when it comes to Lidl’s
product range. Other new addition to Lidl’s product range has been the launch
of their new fashion range in cooperation with the supermodel Heidi Klum. The
product range includes clothing, footwear and accessories and was a part of New
York Fashion Week 2017. (Lidl, 2017)Furthermore, both discounters have
added premium lines to their product range, as a move towards the middle-class
grocery retailing. For example, in 2016 Aldi’s Christmas range included caviar
while Lidl sold a whole cooked lobster. Furthermore, both supermarkets have
introduced their award-winning wine and spirits product lines, organic food,
Italian cuisine. According to a Mintel’s report, 66% discount shoppers think
that food discounters’ premium ranges are just as good as elsewhere.As the British supermarket landscape
gets more saturated, retailers such as Lidl and Aldi are continuously extending
their assortment with attractive national brand offerings as a strategy to
distinguish themselves from the rest. Currently, 70% Lidl’s products are sourced in the
UK (Mintel, 2017). Besides that, it is important to mention that offering
national brands tailored to the UK customer, helps them build strong and sustainable
customer relationships and strengthen their competitive position. (Deleersnyder
et al., 2007)

In conclusion, both discounters aim to
keep their product range as simple as possible, and the product differentiation
within a product category is much more restricted. This technique seems like it
takes away the choice from the customers, but when it comes to managing product
selection, offering more variety is not always the best option. Empirical
research in the field of retailing, consumer packaged goods and financial
services has shown that in many cases offering an array of products can lead to
lower purchase likelihood and lower customer satisfaction. (Chernev, 2003).

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