Comparison of Aldi and Lidl

ABSTRACT

The price war among supermarkets does really benefit the customers in recession time. But the major discount supermarkets like Aldi and Lidl cannot get the all grip on the retail markets as they had it at early stage. They are not able to maintain the position in the market as cheapest retailers because of tough competition from rivals. This project hopes to discuss some of the trends among major supermarkets like Tesco, Asda & Sainsbury’s in pricing to compete with discount retailers such as Lidl and Aldi. It also focus’ on the strategies made by the mainstream supermarket chains to overcome the recession effects.

Topic

‘In the current economy, will the retail discounters loose out? A case study of Aldi and Lidl.”

Aim and Objectives

Aims-Identify the Strength, weakness, opportunity and Threat of Aldi and Lidl to sustain as discount retailers in the current retail market.

Objectives:

1. Find out why people shop at Lidl and Aldi? Their perceptions of the brands, how often they come? How much they spend?
2. To ascertain why Lidl and Aldi customer loyalty has diminished since the competitors changed the strategies.
3. To evaluate the effectiveness of Lidl and Aldi’s recent repositioning strategies on their brand image

Review of Literature:

Scientific and technological revolution have shaped an effective and innovative business order .Since the source of information and information procedures have become rapid and convenient ,the business atmosphere has turn out to be more chaoetic.Consumers are showing their buying capacity with an expectation of high quality for reasonable price. As there are liberal policies, new products and services are launching every day in to the market. Information technology plays a crucial role in the business world with up dated information and rapid way of communication

1. Customer Behavior

Customers are offered tremendous bundle of choices. Some people restricts their choices, becoming relationship oriented with some organization (Sheth and Parvatiyar, 1995) and have the potential to become long life customers. Customers’ life cycles are becoming increasingly transitory due to the severe impact of competitor’s action on existing relationships (Reinartz and Kumar, 2000). Consumer behaviour in retail sector is characterized by impulse purchasing and fickle customers (Newman and Patel, 2004).. This may do to the fact that customers do not experience any switching costs when changing their supplier (Reinartz and Kumar, 2000). Others exhibit switching behaviour in their shopping (Peterson, 1995) and split their purchases among several

Table.1: Attributes of store image

Most Frequently Cited Attribute

Other Attributes

1. Merchandise:

* Selection

* Quality

* Price

* Styling

2. Service

3. Clientele

4. Physical facilities

5. Convenience

6. Promotion

7. Store atmosphere

8. Institutional

9. Post-Transaction

2. Brand:

When a brand is communicated through advertising, packaging and merchandising, it aims to create confidence and minimise the purchasing risk to the consumer (Palmer, 1996). Such attributes, it is held, are particularly important when buying fashion products (de Chernatony and McDonald, 1992; Doyle, 1991). In brief, brand values provide a promise of sameness and predictability (Keller, 2003).

Branding came to be understood as providing a unique mixture of benefits that satisfy rational needs, but also emotional ones, by facilitating and simplifying the consumer’s choice process through behavioural shortcuts, habit and perception. Successful brand is defined as a name, symbol, design or some combination of these, which identifies the ‘‘product” of a particular organisation as having a sustainable differential advantage (Schmitt, 1999).

3. Positioning

To understand positioning from a customer perspective, it is important to explain what is positioning in marketing literature. Although the craft of positioning is a defining function of modern branding, the idea of positioning dates back to Classical Greece, with Plato’s assertion that memories evoke related memories, thus colouring interpretation (Warren, 1916). In the seventeenth and eighteenth centuries, the British empiricists elaborated the Aristotelian notion that ideas are stored in memory by association, developing the three “Laws of Association”; similarity, contrast and contiguity.

Discussion

1. Recession affecting the retailers.

Here we will discuss about the recession and it’s affect on retail markets. As we know that we are running in the bad economic condition. So it gives us unemployment, lack of money, poverty, people go behind the cheap product…..etc. in these situation we call it for recession. Recession participate everywhere around the world. In these situations people are scaring to spend their money in to business or market.

2. Current retail UK Market.

In the current economic conditions the retail markets are trying to grab their customers giving different offers and products. Using cheap price and quality products are the priority for all retailers to the customers and it is the key factor to increase the business and survive the recession.

Neil Saunders, the consulting director at Verdict, said: (telegraph nov 2009) “We are now entering the most challenging period many retailers will have ever faced: the UK retail market is both mature and intensively competitive and that, combined with a slowdown in growth, means everyone will need to work much harder just to stand still.

Andy bond Asda CEO (the marketing blog aug 2009) “We be able to already see how changing attitudes are affecting customers’ shopping habits, Consumers are not prepared to pay a premium when they cannot taste the difference. The era of conspicuous consumption is besides.Saving money by cutting out waste of every part of kinds will be the priority.

3. Major discounters Aldi and Lidl

The German chains Aldi and lidl are discount retailer and fight with the big four rival’s called Tesco, Asda, sainsburey, and Morrisons. The two discounters have to do a lot of work while competing rivals.

Aldi one of the retail company in UK and launched in 1990 and they have more than 300 stores across UK. the company called Aldi sell food, drinks, healthn and beauty product, sanitary items, baby product, and other cheap house hold items and wide variety of fruits and vegetables, including frozen food, fresh meats, fish, desserts, baked goods and alcohol, wines cheese…etc. the important thing that Aldi has concentrated products are own labelled or in other words own brand products and the other brand product or none Aldi products are limited. The store strong in cheapest products and it introduced from GERMANY. So the company typically use two similar brands for all category of the product. So this structure gives Aldi stores to be smaller than general supermarkets which cover the same range of products but with more variety. About the company’s offer to the customer giving special offers per week, special buy deal offer a particular range of product like electronics and car accessories, cloths and house hold items, garden ,appliances…etc at bargain prices on Sundays and Thursdays (it might be for a week or available for limited products). ‘’ Aldi is able to offer deeply discounted prices on around 1,300 popular food items (a typical grocery store has 30,000) due to its various cost-cutting strategies. These include buying cheap land on the outskirts of towns and cities, building cheap warehouses, employing few staff, keeping store furnishings to a bare minimum and carrying mostly private-label items, which are displayed on pallets rather than shelves”. The firm takes a fixed amount of money for carrier bags.

Lidl the rivals of Aldi and the major discount supermarket store chain in UK. the store more aware about their customer and so the firm provides 800 different products. As i above mentioned about Aldi , Lidl has wide variety of their own brand products and the companies priority for leading brand for each category. Food, fresh produce, frozen foods, Italian cuisines, wines, home appliances and garden products including tools and planets are available from Lidl. These are the products known as ‘Specials’ and they offer to the customer low cost of frozen foods as well. “Low-cost operating methods, such as avoiding expensive advertising, high-rent locations and a diverse-range of goods, have enabled it to challenge and even overtake its number one rivals in some European markets such as France”. Lidl can attract more customers in 2008 in the beginning of recession because most of the consumer’s especially middle class consumers started their shopping at discount retailers like Aldi and Lidl. “According to market research firm TNS, Lidl was the second most successful UK supermarket group over the busy Christmas period in 2008, with group sales far exceeding growth in the overall grocery sector”. G

Gavin (2008) describe “When we visited Lidl stores across Europe, we noticed that new, improved ranges are being introduced across fresh and chilled categories. Ranges are far more tailored to national and even regional markets than in the past. Organics, healthy eating and fairtrade ranges have also been incorporated into the mix. And this strategy, too, is very much determined on a country by country basis, in line with key prevailing consumer trends. Clearly many of these elements are not unique to Lidl among its discounting peer group, but the combination of these is leading to the development of an increasingly compelling proposition, with the branded presence in-store a key differentiator from its largest rival Aldi”.

Now come to the point that the big four super markets battling towards the discounters like Aldi and Lidl.TNS world panel realise that the Aldi and Lidl sales from May to July 8.3 percent, 6.8 percent. But in the case of the big retailers achieved second quarter Morrison 9.5 percentage, Asda 8.1 percentage, waitrose8.2 percentage respectively. Paul (2009), Aldi’s UK Managing Director, blames “some of the slowdown in growth on promotional activity from the brands, which has been “pretty effective“. Aldi does not sell the traditional big brands”. The important things that the big four mainly concentrated in their sales called promotions, discount ranges, and advertising campaigns….etc. The Tesco’s promotion known as discounters, Asda’s round pound, Sainsbury’s switch and save, Waitrose essential. Chris (2009) of TNS, said: “The promotional activity the major multiples have put in place has stolen the wind out of the discounters’ sails. Waitrose’s Essentials range now accounts for 15 percent of the grocer’s sales”.

Now the current economic down turn the consumer always looking for the promotions and discount sales. So the major discounters will be loose their sales until they started promotional activity from the traditional brands.

Research methodology

1. Research Approach

To understand the different research approach is in business research. These approaches can be mainly categorized as positivist and critical interpretive, qualitative and quantitative.

Positivist and critical interpretive research

Positivist paradigm believes in the view that the world is external and objective to the researcher, which is identical to the belief used in natural sciences. Positivist researchers are independent of the research being conducted and focus on description, uncovering facts and explanation .Researchers, then by using models and theories that they have created explains the behaviour on the grounds of the facts and observations

The other position, known to us as the critical interpretive paradigm believes in the view that the world is constructed socially and is subjective. They also believe that reality does not exist outside the perceptions of people. Critical researchers are seen as a vital part of the researching process. Critical researchers attempt to discover understandings and discovery of the broad interrelationship in the circumstances they are researching.

Qualitative and quantitative research:

In qualitative research words are the units of analysis. Qualitative research tends to be associated with description. The data needed for qualitative analysis has to be gathered from interviews and questionnaires. Methods like ethnography will be used for the process of qualitative analysis and ethnographic data storage software will be used to store information. There are many advantages of using such software which will help store the data safely, the data can be coded easily, and retrieval of data will be more reliable. Computerization removes barriers and scales to the scale and complexity of analysis. There are virtually no clerical limits to how much stuff you get now, and few to how complex it is. (Richards and Richards 1993:40)

Quantitative research

Quantitative research tends to be associated with numbers, as the unit of analysis and it tends to be associated with statistical data. Charts and graphs have to be constructed from the figures and information gathered from the questionnaires and researches. Word processing and spreadsheet packages can be used for this purpose. Information in the form of numbers will be gathered from Different HR Mangers by using different data collection tools like questionnaires, review of previous documents etc. and the data will be used to construct meaningful figures and charts using software.

Research Strategies

Survey- Since the case study is on the basis of customer behaviour with a clear aim on customers’ perception of a particular brand, certainly the importance is set on primary data. The secondary data backed the primary data using appropriate hypothetical framework. The primary data will be collected using pre-designed questionnaire. Twelve questions were involved in the close ended questionnaire form with shopper’s demographic outlines. Brand and Store loyalty measurement can be done by enquiring Lidl & Aldi shoppers to rate definite qualities on predefined scales. Uni-polar scales will be utilized (Ajzen and Fishbein, 1980) starting from one all the way to five, places very low, low, average, high, and superb respectively. Former researchers, like James et a. (1976) have used the similar scaling methods while assessing attributes of a certain brand or store by implying how much a store is able to fulfil consumers expectation.

In Aldi&Lidl outlets in London where customers should be asked to rate the attributes with one hundred questionnaires.At least Eighty interviews will be carried out in London Aldi&Lidl outlets. Since only Aldi&Lidl shoppers participated, every questionnaire will be involved in the research. A detailed survey must be conducted. The data analysis could be created by using e SPSS12.O which is the data mining programme.

Case study- This research is on the basis of case study since it discovers the individual behaviour of consumers in retail market.Research on the basis of case study is suitable since it covers the contextual situation and a broadly investigation other than a mere theoretical study.More over it is reliable as it provides multiple sources of information. In research, a familiar figure is used to study as it represents the whole concept with itself.Discount supermarket case studies are widely used in most of the UK institutes and research fields as it had a bright past with enormous brand loyalty by customers.,But now the scenario became different and it is facing more challenges to exist in the market.

Explanatory study

Ø On the basis of brand position and theory

Ø Explaining fundamental connection of variables (correlation of style and shoppers customers’ visiting time)

Ø Focusing circumstances for describing the connection among variables.

Form of Presentation

The dissertation will be presented in a written form supplemented with charts showing current and historical data

Conclusion

Aldi and Lidl the major discounters in UK, but the above mentioned information give us they are going to lose in current economic conditions. So the message give us the total picture about the current market, economic conditions, and the rivals in the current markets.

References

Geoffrey Moore, the business cycle research, Jon Gregory Taylor, investment timing and business cycle, john wiley & sons publisher in 1997,p23

Gary marks john F. Maudlin, rocking wall street john wiley & sons publisher in 2007, p92.

Invstopedia forbes digital company(http://www.investopedia.com/terms/r/recession.asp)

India dialy news paper(2007) (http://www.indiadaily.com/editorial/17492.asp)

Bureau for Economic Research (BER) http://www.fastmoving.co.za/news-archive/retailer-news/retail-sector-faces-threat-of-recession

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/3368164/Tesco-most-likely-retailer-to-survive-recession.html

Andy Bond CEO Asda http://www.themarketingblog.co.uk/e_article001292783.cfm

Aldi http://www.supermarket.co.uk/aldi.html

Lidl http://www.supermarket.co.uk/lidl.html

Gavin Rothwell, senior business analyst, IGD, http://www.igd.com/index.asp?id=1&fid=1&sid=19&tid=11&cid=85

http://www.guardian.co.uk/business/2009/jul/24/aldi-lidl-sales-growth