Channel Marketing in the Retail Grocery Industry, Essay Example

ALDI Group presents a viable case for study of current retail channel marketing, and the future integration of networked operations and knowledge sharing. The position of industry partners within the channel marketing relationship contributes to the foregoing analysis as the Group extends its capacity to regional markets.

ALDI Group, a global retail grocery conglomerate based in Germany offers consumers exceptional products at modest prices on high value products made possible through agreement with local suppliers in the Company’s varied national markets (ALDI, 2010). ALDI’s channel operations-to-market strategy has had significant impact in economies of scale like Australia and the United States, where consumer confidence is vested in ‘honest to goodness savings’ sustained by volume discounts on regional products. In 2008, ALDI Group’s revenues reached an estimated $65,700.0 million in tendered sales, with distribution across all markets (Hoovers, 2010). Adequate analysis of the Group’s channel marketing strategy requires industry data on the overall picture of the various market regions, and also product segmentation analysis and customers response. ALDI Group presents a viable case for study of current retail channel marketing, and the future integration of networked operations and knowledge sharing. Interpretation of the position of industry partners within the channel marketing relationship also contributes to the foregoing analysis of the Group’s entrance into regional markets, and its capacity to integrate internal systems of chain management with external measures of competitive performance.

From supplier selection to store location development and operations, each step in the distribution to market chain is managed to facilitate savings substantial enough to impact the everyday lives of consumers. ALDI’s philosophy of grocery retail is based on a ‘less-is-more’ approach, and the simplified strategy for retail operations is intended to address consumer demand without succumbing to the dangers of market saturation: 1) Purchasing power – translates to customer savings with 1,400 ‘select brands;’ 2) Streamlined operations – global operations with decentralized logistics equal cost reductions; and 3) Global standards – adherence to stringent quality standards intended to match or exceed leading national brand in taste, appearance, and/or performance in the various markets (ALDI, 2010). Channel marketing strategy by the ALDI Group looks at the total competitive picture in the retail grocery industry, as well as local trends in competition. For example, ALDI’s market share in its home market in Germany has seen a reduction due to the high level of competition. Retention of the Group’s 19% share has forced the stores in the region to offer shoppers more in terms of international brands, and better marketing incentives through semi-weekly promotions intended to capture a larger segment of the middle-class consumer demographic (Hoovers, 2010). Manufacturer promotional offerings are often involved in the multi-channel approach to consumer marketing, and ALDI employs this type of ‘partnership’ model in its product marketing mix across the board. Growth regions in the United Kingdom and the United States offer a converse picture, with a high degree of response from the parallel segment, as middle class consumers seek quality at deep discounts. For instance, the Group’s planned U.S. expansion is linked to direct competition with Wal-Mart. ALDI has stiff competition, but the density of consumer purchasing in the country reveals that the retail grocery industry in the U.S. is comprised of about 65,000 supermarkets and other grocery stores with combined annual revenue of about $465 billion, of which seventy percent of those sales are generated by fifty of the largest companies (Hoovers, 2010). Since its entrance into the United States in 1976, 10% of ALDI Group’s total global share is now an estimated $5.8 billion annually.

Internal analysis of ALDI Group retail supermarket chain operations advances recent theories on models of sustainable growth through integrated operations approaches to market segmentation analysis and channel marketing approaches to consumer advertising (Piercy, 2008). Prior to globalization, grocery marketing was relatively direct, in that advertisers and marketers merely sought synthesis between consumers and product line. Since the 1950s, national brands presented through multi-marketing channels on television, press and public advertising offered marketing professionals a platform for traditional research methods. Instruments such as household surveys were considered effective enough, and consumer market segmentation was treated as a dependent variable, whereby the product and its magical qualities would fulfill demand if only it was transmitted right to the consumer. Contemporary marketing analysts now interface those more traditional approaches with new methodologies of data collection (i.e. internet) and dissemination that include consumer preference, psychology and global aggregates on trends in consumption as the formative basis for research and development of products (Piercy, 2008). Channel marketing systems that connect all aspects of retail operations allow companies to extrapolate data from customers, inventory and suppliers, that can then be used as feedback for the design of in-depth consumer insight research studies intended to look at both qualitative (i.e. ethnographic) and quantitative (i.e. demographic, fiscal, inventory etc.) results in dialogue with partners in the organizational chain (Piercy, 2008).

ALDI Group’s multiple retail chain outlets sell products through a number of different channels, and to a seemingly unlimited number of consumers well educated on price information. Less than half of all buying decisions are made before the customer shops. Public advertising and reporting on price parity furthers accuracy in decision making as consumers confront the density of available knowledge through online communications. ALDI Group has been exceptional in product alignment in regard to flexible forces in global market demand, and incorporates volatility into its strategy in general, by way of local supplier relationships. Hence, ALDI is a leader in the grocery industry due to its dedicated channel differentiation of products to its national and regional segments. Initiation of product lines is dependent upon ongoing reporting on those distinctions, and the Company’s channel marketing model considers integration of supplier to market operations to be of high-value. The Company employs an ‘operating system’ as the key interface for integration of its decentralized inventory control systems in the various regions, and accountability at ALDI Headquarters in Germany. Cost analysis and logistics forefront the contributory effects that the well designed inventory control system offers; with market analysis through best-of-class shopper insights and category management methods and technologies secondary in data management priority.

Figure 1

Figure 1: ALDI Channel Market Operations System

Conclusion

The overall systemization of the Group’s retail stores allows rapid activation of Point-of-Sale insights toward the goal of advancing consumer preference in the stores, to development of better and new partnerships with suppliers with as close to ‘zero’ inventory levels in mind. Options to linking market knowledge with operational logistics are many, and include improved speed to market, more accurate hypothesis testing, increased revenue and more efficient spending. Channel marketing proceeds from this effect, and the impact on multi-channel  marketing strategies stand to benefit from the inventory control and tracking system which includes the Company’s global and regional marketing, sales and marketing research units. Through the ROI, ALDI is able to align brand strategy with retail strategy, and overall product to market execution.

References

ALDI Group USA (2010). Retrieved from: http://www.aldifoods.com

ALDI Group (2010). Hoovers Industry Report. Hoovers. Retrieved at: http://www.hoovers.com

Piercy, Nigel F. (2008). Market-Led Strategic Change: Transforming the Process of Going to Market. Oxford: Butterworth-Heinemann.