Thursday, September 09, 2010

Shopping Carts at Aldi

As many of you know, Aldi - the German discount retailer - has been opening many new stores in the United States. Aldi operates a small footprint, discount store largely stocked with private label products. It sells a limited range of SKUs in those stores. The firm offers products at such low prices because it has perfected a model that drives costs incredibly low.

One cost reduction effort that I find quite interesting is the shopping cart strategy at Aldi. We all know that shopping carts are a messy problem at many supermarkets. Shoppers leave the carts all over the parking lot. The wind catches some carts and causes damages to parked automobiles. The stores has to pay someone to go retrieve carts all over the lot so as to make sure that shoppers will have available carts when they enter the store. How does Aldi deal with all these issues? It charges refundable 25 cent fee for a shopping cart. You pay 25 cents to get a cart before you shop, and you only get your money back when you return the cart at the end of your store visit. What's the impact of this very small fee? Here's where human psychology works wonders for the firm. Despite the very small amount of money, the overwhelming majority of shoppers returns their cart and gets their 25 cents back.

Why is the return rate so high? Perhaps we see this effect because the typical Aldi shopper is in search of value and very conscious of their spending. Most people think there is more to it though. There's just something about paying for a shopping cart that probably bothers people; they want that quarter back. Moreover, as one Aldi employee told me, perhaps people simply don't want to give the next shopper who comes a long a free cart, which would be the case if they left the cart by their car. Of course, I find that interesting. It would seem that otherwise very charitable people do not want to "give" others a free shopping cart rental. The specifics of this setting seem to make them far less altruistic! Of course, social psychologists have long argued that small changes in a situation or setting can drive behavioral changes; here we see that quite clearly.

By the way, what does Aldi get from this policy? They save the money associated with having to pay someone to go retrieve carts all day, and they have customers who don't get annoyed by dents and scratches on their cars from roaming shopping carts. Not bad at all! Just one more piece to their low-cost model...

10 comments:

Herr Pedersen said...

In Europe (well, Norway at least) ALL shops have this cart system, low cost or not. It seems to me that there is a correlation between being lazy and ignorant and being a cheapskate.

We also have a system of reserving seats in cinemas, not free seating as you do across the pond. Much more efficient.

But you might like your "freedom" more than efficiency, what do I know :o)

Andy Kaufman, PMP said...

Funny you write about this, Michael.... We have a relatively new Aldi by us in the Chicago suburbs. I enjoy shopping there, amazed at how I can leave with so many groceries for so little cost.

Every once in a while I'll give someone my cart (with the quarter intact). It truly cracks me up how excited people are! The expression of appreciation is as if I had given them a $20 bill!

Thanks for sharing your insights!

David said...

Interesting. Brings to mind the Israeli day care center study. Except in this case people aren't using the 25 cents as justification for leaving carts in the parking lot.

David K said...

Australian model is with a gold coin, $1 or $2. It also seems to reduce shopping trolley wanderings. These stores also have lots of in-store plastic baskets and trolleys. I must admit that I use these and then carry mu groceries.

Kristen said...

Why is the return rate so high? Perhaps we see this effect because the typical Aldi shopper is in search of value and very conscious of their spending....wholesale sunglasses

Susan Hardy said...

What a great blog! Love to see the Aldi gospel get spread around. Regarding the carts, I have tried several times to hand off carts to people getting out of their cars and they INSIST on giving me that quarter, so I can't say I've run into many cheapskates. You might get a smile out of my own post today: Top 10 Reasons Why Aldi Rocks (and One Caveat):
http://www.susanhardy.org/2011/10/food-10-reasons-why-aldi-rocks-and-one.html

Grean Herbz said...

This blog post contains very useful information. I am very glad that I found this blog. Keep on sharing such useful information in future.
Herbal Potpourri

Legal Puffs said...

Hey I want to share some of my experience with you. I don't know about others but this blog is very helpful for me. Great work that you have done. Thanks for sharing.
Herbal Potpourri

Devoted2 said...

On Facebook some guy is recommending they do like he did and keep 10 shopping carts at the 25 cents each. Turn them in to a metal scrap dealer and come out a few hundred dollars ahead. Is that legal? Is that moral?

cavemandan said...

i want to hire the salesman who sold this srupid idea....the company is too dumb to understand it is costing them billions in sales...idiots