The report contemplates on two world famous retailers namely-Aldi and Walmart and how they go about in terms of their marketing channels. The report also emphasizes on the distinct nature of retailers and their competitive advantage in doing so.

1. 0 | P a g e

2. 1 | P a g e
Table of Contents
Contents Page Number
Executive Summary 2
1 Introduction 3
1.1 Introduction of the two companies 3
2 Marketing Channels 4
2.1 The Marketing Channel for Both Organizations 4
3 Strength and Weaknesses of respective channels 6
4 Strategic roles of channels 6
4.1 Strategic roles of channels in Aldi & Walmart 7
5 Integrating traditional and non-traditional channel 7
5.1 Integrating traditional and non-traditional
channels in chosen organizations
7
6 Recommendations 8
7 Conclusion 9
8 Appendix 10
9 Reference 12

3. 2 | P a g e
Executive Summary
This report contemplates on the marketing channel used by two retail giants Aldi and Walmart.
Though both of them use quite similar distribution channel, they differ in some instances. Where
Aldi uses the online platform to merely promote their products, Walmart uses their own website
and mobile app for both selling and promotional purposes. Aldi’s suppliers directly send the
products to the stores but Walmart first stores the products in their distribution warehouses, from
where products are then sent to the Walmart Retail Outlets. It has to be mentioned that, none of
the companies use third party services to sell their products, rather individual delivery companies
exist in the channel to simply deliver their goods for an additional charge by that delivery
organization. The report will also provide information on the strategic roles these organizations
play towards their manufacturer and customers. The integration of traditional and non-traditional
channel formats has been pointed out where these are complement to each other to benefit the
organizations.

4. 3 | P a g e
1 Introduction
The purpose of this report is to engage in an extensive and relevant strategic analysis of two
different retail organizations (Aldi and Walmart) and describe their marketing channel for
delivering and distributing their product. The report will point out the strength and weaknesses of
the respective channels in relation to the organizations’ marketing mix followed by the strategic
roles that channel members play to control cost and produce high quality products will be
explained here and the expertise of the organizations in maintaining strategic alliance with them.
The report will also discuss on the integration of traditional and non-traditional channel formats
and provide references on how the chosen organizations are doing this. At the end,
recommendations will be provided for a (fictious) new entrant into the retail industry as per the
analysis through the report and what sort of channel they can use to distribute their product.
1.1 Introduction of the two companies
In order to facilitate the analysis, this report will focus on the retail industry comparing two of
biggest growing supermarkets- Aldi and Walmart.
Albrecht Discount Inc. also known as Aldi, is a very well known German supermarket discount
chain that was founded on 1913 by two brothers Karl and Theo Albrecht. With more than 8500
stores in 8 countries Aldi operates mainly in Europe, Unites States and Australia. Their main
principle is to provide high quality products in low price (Aldi 2016). They also specialize in
private labeling and use the ‘no frills’ concept to obtain their business objectives.
Walmart is an American retail company serving 260 million customers with 11500 stores in 28
countries. With a revenue of $482.1 billion in 2016, Walmart was established 1962 in Arkansas
(Walmart 2016). Walmart topped the Fortune 500 in year 2016 for the fourth consecutive year
and has provided extensive customer service with high quality products with everyday low cost
over the years (Wahba 2016). Walmart offer various range of products like fashion, toys,
groceries, household appliances, electronics, health care products and so on (Bagons 2013)

5. 4 | P a g e
2 Marketing Channels
The set of activities that facilitate the transfer of goods and services from a producer to end-
consumer is known as Marketing. The chains of intermediaries or businesses that take part in this
are the channel members. This can include wholesalers, retailers, agents, merchants etc.
Channels are usually broken into direct and indirect forms (Investopedia 2016).
2.1 The Marketing Channel for Both Organizations
This part of the report will mainly point out the channels used by Aldi and Walmart to reach their
customers. As both the organizations are huge discount retailers and selling through
supermarkets, the channels used by them are somewhat similar. But based on the products they
sell, the channel system varies for some instance.
Aldi’s channel structure has been given below-
The diagram points out Aldi’s main distribution channels. Aldi sells fresh groceries and products
mostly needed which they collect directly from the manufacturer through a strategic alliance.
The products are collected from decentralized regional logistics centers which are then set up in
trays for consumers to buy from Aldi owned retail stores. Aldi products can also be collected via
a third-party grocery delivery service provider (Figure 1)- ShopWings android app in Australia
after paying a fee ranging from $4.90-$9.90 depending on basket size (Chung 2016). Again, Aldi
Manufacturer
sdfsdBra]Bzsckajm
ckasmckmasklcma
BrandBrands
Aldi Retail Stores
Consumer
iForce ShopWings

6. 5 | P a g e
has recently cracked a deal with logistics company iForce to help facilitate its non-food e-
commerce platform. Consumers can simply use iForces gateway service to buy Aldi products.
But this service will be limited to Wine and special products like handheld vacuum cleaners and
coffee machines (Supply Chain Analysis 2016). It has to be mentioned that, Aldi uses their
official website (www.aldi.com) only for promotion purposes and does not engage in Online
selling directly. They use selective marketing strategy because their stores are not available
everywhere. Also they offer low range of grocery products to support their business objective.
The Channel structure for Walmart is as follows-
The diagram above explains that Walmart collects their products directly from the producers
cutting down intermediaries. These products are then stored in various distribution centers from
where products are dispatched to Walmart stores everywhere by their own fleet of trucks
(Wulfraat 2016). Their target market is consumers who buy in bulk for a limited period and save
costs. Walmart stores are always crowded due to their low prices. As a result they offer ‘Buy
online-Pick up in store’ service which can be done by their own mobile app (Figure 2) or online
website (Figure 2.1) (grocery.walmart.com). Consumers can also order their daily necessaries via
the website and mobile app incurring some delivery charges which is merely based on the items
size, weight, shipping method and delivery address (Walmart 2016). They use intensive
distribution strategy by opening new stores to reach more consumers. They make shopping a lot
easier for their consumers in terms of locations (Ferguson 2015).
Manufacturer
Walmart Retail Stores
Consumer
Walmart Online
Store
Walmart Mobile
App

7. 6 | P a g e
3 Strength and Weaknesses of respective channels
As mentioned earlier, both Aldi and Walmart use a direct channel to obtain their products giving
them a slightly competitive advantage over other retailers. This is hugely because; cutting down
intermediaries allows them to push down product prices so low that other retailer fall out of
competition.
For Aldi, their producers supply them the products in ready to display cases which are placed
directly to the shelves when stocks finish (Figure 3). In fact, they use a just-in-time approach to
store management by holding stock only when necessary. So they don’t have to tie up
investments in stock but have substantial increase in working capital (Business Case Studies
2016). Aldi’s primary products are their fresh groceries. Getting it directly from the
manufacturer ensures high quality, value for money in less time. Moreover, they use an official
website to promote their products and make customers aware of their weekly sales and updates.
Their main strength is in their limited assortment concept which allows them to focus on high
quality, high volume obtained by lowest price. In spite of this Aldi still has a weakness in their
channel. For some customers, aldi offers limited range of products, low level of service and
absence in value added meals (Mitchell 2015).
Whereas Walmart offers huge range of products. They also offer free pick up service if ordered
online. Their mobile app allows customers hassle free shopping. Their Canadian stores offer
standard and express shipping services for customers where products are supplied directly from
their warehouse. Also their website allows users to know about their promotions. Walmart has
literally flooded the market with their presence (Strategic Minds 2011). Such huge market
participation has allowed them to exercise coercive power over their suppliers to maintain low
price.
4 Strategic roles of channels
Channel members perform various functions and add value to the firm’s products. Customers
assess products worth by evaluating many factors associated with it. A marketer must assess the
benefits they receive from using a channel member versus the costs incurred for it. Furthermore,
these functions utilize scarce resource of the company and each function can be transferred
within various channel members (Bhasin 2016).

8. 7 | P a g e
4.1 Strategic roles of channels in Aldi & Walmart
Both Aldi and Walmart perform certain function towards their suppliers and customers. Aldi and
Walmart buy products in high volume from their manufacturer for a very low price but offer long
term deal if certain criteria’s are fulfilled and maintains good relationship. Aldi’s suppliers
package the products in such a way that it can be displayed directly in trays for sale. Moreover,
95% of aldi’s products are private labeled (Creevy 2010). Aldi takes the help of Logistics
Company such as- iForce to help shift their products and deliver non-food products.
Walmart uses Vendor Manages Inventory (VMI) which shifted the responsibility towards
manufacturer for managing their products in walmart warehouses (Lu 2014). They also construct
communication and relationship networks with their suppliers to upgrade significant flow of
goods. Their Cross docking logistics practice ensures direct transfer of products in and out truck
trailers without extra storage (Figure 4).
Aldi and Walmart perform few similar distribution tasks towards their customer’s like-
debit/credit card service, product availability, trolleys, trained employees that provide help to
handle any product and so on.
5 Integrating traditional and non-traditional channel
Integration of marketing channels is basically an approach used by organizations to brand and
co-ordinate their transmission efforts. The channels mainly complement each other at a multi
channel system and improve customer satisfaction (Lankenau 2004).
5.1 Integrating traditional and non-traditional channels in chosen organizations
Aldi and Walmart are retail giants. The usual tradition in a retail industry is that they collect their
products from wholesalers. But as mentioned earlier, both aldi and walmart get their products
directly from manufacturer, this creates a non-traditional form in the retail industry. They also
use online websites and mobile apps owned by them to sell their goods and services. Though
walmart uses the online platform for selling and promoting their products, Aldi uses this
platform merely for promotion purposes only (Klein 2004). Furthermore, Aldi are placed as cost
leaders and uses a low-complexity, limited assortment, and no frills approach. Since the
customers for both organizations are price-sensitive they mainly focus on selling their products
through traditional physical stores.

9. 8 | P a g e
Integration of both online and offline distribution channel depends on the firms abilities on
performing certain logistics services and their efficiency on the matter. Also the advancement of
technology plays a vital role rather than any strategic decision that would favor any specific
channel. As a result, both aldi and walmarts online platform allows them to reach to as many
customers as possible but their main focus remains on selling their products via physical stores.
Although walmart recently entered into an agreement and acquired leading online e-commerce
company JET for $3 billion to compete in the online retail industry and reach out their customers
(Walmart 2016).
6 Recommendations
For a company that wants to sell products/services in a retail industry it is very important to be
up to date with the ongoing trends and take advantage of every possible opportunity. Retailers
directly deal with customers. So the company will have to have improves customer service, train
employees and master the art of creating customer loyalty. The retail company should also have
an extended product line and offer options so that customers keep returning to the shop.
Furthermore, the company should be selective about their vendors because suppliers who sell at
low price won’t necessarily supply quality goods. So the company should be aware about the
products quality, conditions of sale, logistics and so on while choosing a vendor. The retail
company should also look for opportunities to cut operational costs and erode intermediaries if
possible so that they can offer low prices and weekly sales for their customers. The company can
also invest in marketing efforts and place ads and commercials to make their customers aware
about their existence. They can take the help of technology to facilitate their operational or other
activities. This will allow them to save time and increase profit.

10. 9 | P a g e
7 Conclusion
In conclusion this report mainly focuses on the distribution channel of two leading discount
retailers Aldi and Walmart along with their success stories. Walmart has been the leader in many
instances and a role model for other retailers. But Aldi is not far behind. They are using
innovative ways and creating strategic alliance with their suppliers to offer high quality goods for
their customers in a price lower than Walmart in some cases. Aldi’s low assortment concept has
allowed them to focus on their business objectives whereas Walmart has already established
themselves as the best discount retailer in the industry. They both play a vital role towards their
manufacturers and customers by offering extensive service, contracts, promotions and so on.
They are using online and offline distribution methods to manage their sales activities and reach
as many customers as possible.

11. 10 | P a g e
8 Appendix-
Figure 1- ShopWings Mobile App Figure 2- Walmart Mobile App

12. 11 | P a g e
Figure 2.1- Walmart Owned Website
Figure 3- Aldi’s ready to display cases
Figure 4- Walmart Cross docking logistics

13. 12 | P a g e
9 References
Study Moose,2016,‘Strategic Analysis of Aldi Essay’, viewed on 25 September 2016,
<http://studymoose.com/%EF%BB%BFstrategic-analysis-of-aldi-essay>.
Walmart, 2016, ‘Deal Position Walmart for Expanded e-Commerce Growth and Customer
Reach,’ viewed 25 September 2016, <http://news.walmart.com/2016/08/08/walmart-agrees-to-
acquire-jetcom-one-of-the-fastest-growing-e-commerce-companies-in-the-us>.
Lu, C 2014,’Walmart's Successful Supply Chain Management’, viewed 25 September 2016,
<https://www.tradegecko.com/blog/incredibly-successful-supply-chain-management-walmart>.
Mitchell, S 2015,‘Coles, Woolworths urged to target Ald’s wealnesses’, viewed 26 September
2016,<http://www.smh.com.au/business/retail/coles-woolworths-urged-to-target-aldis-
weaknesses-20150527-ghav10.html>.
Business Case Studies, 2016, ‘Competitive advantage through efficiency’ viewed 25 September
2016,<http://businesscasestudies.co.uk/aldi/competitive-advantage-through-
efficiency/introduction.html>.
Clifford, S 2011, ‘Where Wal-Mart Failed, Aldi Succeeds’, viewed 26 September 2016,
< http://www.nytimes.com/2011/03/30/business/30aldi.html?_r=0>.
Wahba, P 2016,‘5 Things You Don't Know About Walmart But Should’, viewed 26 September
2016,<http://fortune.com/2016/06/06/fortune-500-walmart/>.
Bhasin, H 2016,’Functions of channel members’, viewed 26 September 2016,<
http://www.marketing91.com/functions-channel-members/>.
Ramachandra, M 2015,’How is Walmart able to sell products at a much lower price compared to
its competitors?’,viewed 26 September 2016, https://www.quora.com/How-is-Walmart-able-to-
sell-products-at-a-much-lower-price-compared-to-its-competitors>.
Ferguson, E 2015, ‘Walmart’s Marketing Mix (4Ps) Analysis & Recommendations’, viewed 27
September 2016, <http://panmore.com/walmart-marketing-mix-4ps-analysis-recommendations>.
Bagons, S 2013,‘ Top Marketing strategies that can be Learned from WalMart’, viewed 27
September 2016, http://www.veteranstodaymoney.com/2013/09/top-marketing-strategies-that-
can-be-learned-from-walmart/>.

14. 13 | P a g e