Friday, November 6, 2009

╠ Allocating consumer costs correctly ╣

I recently discovered the haste with which stock can clear from an Aldi store. If you want that special item that they have every week then you better get in before 11am on the day of launch.

The thing about Aldi is it allocates the cost paid by the consumer accurately. Aldi consumers are not necessarily monetarily rich, but instead time rich. Therefore they can go to the extra effort.

I wondered why Aldi didn't simply raise prices to meet demand. However it goes back to the time rich nature of consumers. Yes, there are people who miss out a lot of the time, however most of their consumers are time rich meaning they can head in early. If they really want the product then they will be in at 9am. So whilst you may have people in throughout the week asking for the product, a lot of them only want to look at it. It's not unreasonable to assume that 90% of people who want the product may be in early on that Thursday.

What makes a good business is to set your costs to the consumer focussed around what they're most willing to pay. Are they time poor, travel distance poor or just money poor. Making sure you align your business with what your customers are rich in means your customers will be overall more satisfied. Another example of this is 7-11 which survives due to catering to time poor consumers.


Jono said...

This confuses me... if the item is so popular... why don't they just order in more stock... that way they can supply the people who come early AND later in the week. Selling more stock = making more profit does it not?

Tannie said...

This is the problem with Aldi. It's hard to predict. The thing with Aldi s that it will either be a hit or it won't.

The nature of Aldi is that if you really want something you know you have to get in early.

The other thing about Aldi is that the majority of their regulars are money poor, meaning they usually have pretty free schedules.

This means that if you want something most people can head in early to get it.

So the way it goes is everyone heads in early and they're sold out in a few hours. If people don't want it they simply won't show up and the stock will still be there.

Therefore no matter how much they get in most of it will move in the first few hours.

The problem they get is if they get more in there may not be enough demand. On top of that rarity builds demand and makes people head in at a set time rather than heading in at their convenience which may be never.

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