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A08-20-0005HBS Product No. TB0583Copyright © 2020 Thunderbird School of Global Management, a unit of the Arizona State University Knowledge Enterprise. This case was written by Professor Kannan Ramaswamy for the sole purpose of providing material for class discussion. It is not intended to illustrate either effective or ineffective handling of a managerial situation. Any reproduction, in any form, of the material in this case is prohibited unless permission is obtained from the copyright holder. Kannan RamaswamyAldi and the Hard-Discounters March Across AmericaWe have no bags. We have no checks. We have no perishables. We have no fancy shelving. We have no overtime. We have no fancy floor. We have no prices on product. We have no fancy fixtures. We have fast checkout. We have little advertising. Aldi advertisement in the Iowa City Press-Citizen, 1976Aldi had come a long way since its first U.S. store opened in Iowa. They prided themselves then about what they were notoffering their customers, an approach that might have appeared quite unusual to the U.S. shopper. However, as 2019 drew to a close, Aldi had perfected its minimalist approach to the grocery business and appeared set to march farther west to states such as Arizona that had yet to witness the hard-discounter trend that was slowly transforming grocery shopping across the country. Aldi was targeting a 700-store addition to its current network of 1,800, and planned to serve 100 million customers, thus laying claim to the 3rd spot in the league of the biggest U.S. grocery chains, behind Walmart and Kroger. The rise of Aldi did not go unnoticed, however. Supermarket chains were revamping their own stores to refresh their value propositions, migrating more to an omnichannel environment to capitalize on the meteoric rise of the internet and online grocery shopping. Aldi, tellingly, did not have much of an online presence. It had also seen the arrival of its German peer, Lidl, on American shores. Lidl, too, had a similar approach to Aldi and had chalked up plans for expansion across the U.S. starting with the East Coast. In the midst of these important changes on the horizon, it was rumored that Aldi’s expansion into some of the western U.S. states would be delayed. A McKinsey report released in December 2018 stated that “much of the $5.7 trillion global grocery industry is in trouble. Although it has grown at about 4.5% annually over the past decade, that growth has been highly uneven—and has masked deeper problems. For grocers in developed markets, both growth and profitability have been on a downward trajectory due to higher costs, falling productivity, and race-to-the-bottom pricing.”1It predicted the demise of half the population of grocery chains as a confluence of three major changes; namely, significant shifts in customer shopping habits, intensifying competition, and the advent of new technologies.

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