How to be German: The industry dominance of the discount supermarket

 Wikimedia /  Onderwijsgek

Wikimedia / Onderwijsgek

Our resident psychologist Sven Rudloff joins us to explain the background of Germany’s industry-dominating discount supermarkets, Aldi and Lidl. Listen in the player above or continue reading!

Today I want to talk about a particular German success story: How two brothers created a completely new kind of retail business that conquered the world and the purses of all cost-conscious consumers - the discount store. If you ask Germans about the ALDI stores, they will tell you that you can buy there cheap but with reasonably good quality, and maybe that ALDI’s reclusive owners are the richest people in Germany. They may however not necessarily know that ALDI is also the largest retailer in the world, and that they in fact invented the discount category as we know it.

It was 1913 when Karl Albrecht senior and his wife Anna opened a small store in a suburb of Essen. At the time, and for many decades to come, such family-run shops provided their neighbourhoods with food, household goods, simple textiles and everything else essential for everyday life. The shops also stocked goods that were easy to store but actually came from far abroad; this led to this category often also be called “colonial goods stores”. Dry goods were usually not pre-packaged but sold by weight and packaged in-store. The relationship between the shop owners and their customers was very personal; regulars could buy on credit, and the owners took special orders and often did home deliveries, too. Especially after the Second World War, such stores became colloquially known as “Aunt Emma shops”.

In 1945 the two sons of the Albrecht family, named Karl junior and Theo, took over their parents’ business and started expanding. Within 15 years, the brothers owned more than 300 stores across Western Germany. But the time of the small “Aunt Emma shops” came to an end with the rise of supermarkets: Large self-service stores with a wide selection of products and brands. The Albrecht brothers also experimented with the supermarket concept, but even their larger stores were too small to compete. Today, a German store has to be at least 400 square meters in size to be called a supermarket. The experimental Albrecht supermarkets were only half that size.

Eventually, the Albrecht brothers had a new idea: Could our smaller stores compete with the large supermarkets on price if we get rid of all unnecessary costs?

So what are ways to reduce costs? Significantly cut the number of products you offer, and offer only one product per category. Ideally, agree with the supplier of a good-quality product that their product will be the only one in this particular category sold in your shop; in return for this exclusivity and the large quantities they can sell this way, you get a very good purchase price. At the same time, require that the product is not sold under its original brand but under a no-name store brand. This way, you can still switch suppliers in the background if you want to, and the supplier doesn’t dilute its own brand by offering their product in a discount store.

More ways to cut costs is to only offer products that sell quickly - so called fast-moving consumer goods (FMCG) -, and to avoid fresh products that can spoil easily or require specialists to sell like fresh meat or fish. Cut down on personnel and train the cashiers to do all necessary tasks like re-stocking shelves by themselves. Do not offer special services, discounts or buying on credit to customers. And finally, avoid costly store interiors, decorations and marketing campaigns.

As a result, even with an attractive margin for the store owners, consumers can enjoy low prices as if they got a permanent discount. This is why this retail concept is known as the “discount store”.

1961 the Albrecht brothers started to run with this concept and called their newly organised stores “ALDI”, short for “Albrecht discount”. They expanded quicker than any other retailer ever. The turnover per employee in the new ALDI stores was ten times that of their previous ventures. Because customers could only pay cash but the brothers had agreed a 30 day time for payment with their suppliers, they always had enough cash in hand to invest in new stores without the need to take out bank credits.

Today, ALDI has more than 4,000 stores in Germany, another 4,000 in the rest of Europe and about 1,500 stores in the US and Australia.

However, ALDI is in fact not one company but two. No one knows why, but at the same time they started their success story, Karl and Theo split the existing stores between them and continued more or less separately, but on good terms. Today, ALDI Nord, with a blue logo on white background, operates in Northern and Eastern Germany, in Denmark, Poland, and the Western countries of continental Europe. ALDI Süd, with a light blue logo on dark blue background with an orangey border, operates in Southern Germany, Austria, Switzerland, Hungary and Slovenia, as well as in the UK and in Ireland. The more than 1,300 ALDI stores in the US also belong to ALDI Süd, while ALDI Nord owns the US retail chain Trader Joe’s.

Even today, ALDI is still owned by the Albrecht family. The two brothers were very reclusive, never gave interviews, and there are hardly any photographs of them. Karl, the elder and owner of ALDI Süd, was the richest man in Germany since the 1970s, with an estimated wealth of more than 18 billion Euros at the time of his death last summer. His younger brother Theo, owner of ALDI Nord and the second richest man in Germany, already died in 2010.

Theo gained some publicity when he was abducted in 1971 until a ransom of 7 million Deutschmarks was paid. The two kidnappers were caught but half of the ransom money was never found.

ALDI like all discounters has always been seen as stores for low-income customers. However, the quality of the ALDI products is solid, consumer tests regularly praise them, and some of ALDI no-name products can easily compete with well-known brands. So it’s no surprise that about three quarters of the generally cost-conscious German households regularly shop at ALDI. Why buy expensive champagne if you don’t want to show off and you can get a decent cheap one from ALDI - or from Lidl?

Let’s not forget that the world’s second-largest discount store chain is also German: The Lidl company had already existed since 1858, when its owner Dieter Schwarz turned it into a discount chain in the 1970s. Today, Lidl has almost 10,000 stores in 26 European countries, and they are about to enter the US market, too. Compared to ALDI, Lidl focuses very much on food, and with 1,600 food products it offers more than twice that what ALDI carries.

Looking back at my four “How to be German” topics so far, it seems process improvement is a common theme. Be it for producing TV crime movies, setting industrial and educational standards, making beer, or running shops. Let’s see if I can find more aspects to being German next time.

How to be German: Craftsmanship and Quality

Each month our resident psychologist Sven Rudloff brings us insights on what it means to be German - with interesting stories about typical German things and the German psyche.

Read the article in full or take a listen in the player below!

Today I want to talk about German craftsmanship and quality. Germany has this long-standing reputation of being a country of excellent engineers and technicians, building reliable machinery - including cars. Most of the names associated with the birth of the automotive industry are German - Daimler, Diesel, Otto, Benz, Porsche. And after a century, German cars are still seen as of high quality in international comparison. 

 German cars are often cited as examples of great German engineering. Image:  M93 / Wikimedia

German cars are often cited as examples of great German engineering. Image: M93 / Wikimedia

But one could also name Johannes Gutenberg as an example, the inventor of movable type - not of the printing press, though, this had been around some time before Gutenberg. Or remember Wernher von Braun, equally famous and infamous for his involvement in the development of rockets and missiles, first for the Nazis and then later for the Americans, up until the moon landing. Or take German technology companies like Siemens or Bosch whose engineering services and products are asked for worldwide.

The notion “Made in Germany” on products has for quite some time been a seal of quality. But has this always been the case? No, quite to the contrary. It’s probably not that quality is built into the German psyche, but more so the eagerness to organise stuff. Therefore, two things that actually helped to make German engineering such a success story are standards, and standardised education.

The birth place of the industrial revolution was Britain, but as industrialisation spread across Europe and the US in the second half of the 19th century, other countries including Germany tried to imitate British products. The British were annoyed by the initial low-quality copies of their inventions, and in 1887 English Parliament passed the Merchandise Marks Act. From then onwards, all products sold in England had to bear the country of their origin, to make imports highly visible. This is were the “Made in Germany” seal comes from.

But the British initiative against the cheap German copies backfired eventually. The Germans themselves had become annoyed by the low quality of their products. The German engineer Franz Reuleaux served as a judge at several International Exhibitions of the time. After the World Fair in Philadelphia in 1876, Reuleux famously scolded the products of his home country as cheap and bad. In the following years, several initiatives led to a remarkable improvement of German production processes and quality, mainly driven by the setting of common standards. For example, Reuleux himself oversaw the introduction of a unified patent law across the German Reich. Organisations were formed to ensure the quality of technical equipment, like the predecessor of the German TÜV - the Technical Supervision Association. Most Germans mainly know the TÜV as the organisation that checks your car for roadworthiness. However, the TÜV’s objective is to oversee the safety of all sorts of technical equipment, from home appliances to industrial machinery. It was originally founded in the late 19th century to ensure the safety of the growing number of boilers and steam engines in Germany, following some devastating incidents. Over time, the TÜV’s scope expanded with technical development.

 Many Germans who wish to learn a craft complete an apprenticeship. Image:  Arbeitgeberverband Gesamtmetall / Flickr

Many Germans who wish to learn a craft complete an apprenticeship. Image: Arbeitgeberverband Gesamtmetall / Flickr

But only because you set a few new standards and introduce more regulation doesn’t automatically result in widespread improved quality - you have to instil the new spirit into the people actually doing the work. Here is were the famous dual education system of Germany comes into play. Many countries very much focus their schools on equipping children for university only. If you are not qualified or interested in university, you may learn a craft instead - but this usually means that you mainly learn the actual handiwork of a craft but forego academic education altogether. In Germany, only one third of children leaving school go directly to university while two thirds do an apprenticeship. This means that they join a certified program in which they work part of the week for a company that pays them and teaches them the relevant skills. The rest of the time they spend in school for further education, covering more academic skills around their chosen profession. This is what is meant by “dual education system” - you have both practical and academic parts. It’s a very practical, applied approach. At the same time, German apprenticeships are standardised across the country and highly recognised.

And this brings us back to the German quality initiative of the late 19th century: By making safety and process improvement part of the respective apprenticeship curricula, Germany could educate within only a few years a new generation of quality-minded and qualified technicians. While some university-educated engineers may have set the course, it came down to the technicians, builders and administrative staff in factories to ensure that proper processes really became reality. 

And so it happened that by the time the English Parliament issued the Merchandise Marks Act, Germany was already overtaking Britain in terms of product quality, and the “Made in Germany” mark that was supposed to condemn products imported from Germany became a seal of quality worldwide, to this very day.

 DIN's headquarters in Berlin. Image:  Standardizer / Wikimedia

DIN's headquarters in Berlin. Image: Standardizer / Wikimedia

However, there are two facts that I also need to mention. 

First, while the foundation for Germany’s industrial quality had been laid by the early 20th century, both World Wars and their aftermath helped to grow it further. In 1917, the predecessor of today’s German Institute for Standardisation - abbreviated DIN - was founded, as central governing body for standards. You may now this abbreviation from the German paper sizes like DIN A4. While the introduction of a central governing body for standards was a logical step in the further professionalisation of German industry, the true reason was more specific - it was to focus all of Germany’s industry to support the war effort. Similar organisational and regulatory measures were made before and during the Second World War. So when Germany’s industry was being rebuilt in the 1950s, this could be done based on a long history of established standards and experience across industry sectors.

Finally, the German engineering focus hasn’t always been positive. There are many examples where Germans “over-engineered” something - they made it too good or too complicated for actual use. Appliances may be clever and long-lasting, but when they eventually break, you often need a specialist or even the original manufacturer’s help to get them repaired - if this is even possible.

So, sometimes we overdo it with our focus on quality and organisation. So it may not come as a surprise that after four years in the UK, I often wanted to tell the British colleagues “Couldn’t you be a little bit more organised?” - while at the same time I wanted to tell my German colleagues “Couldn’t you just relax a little bit?”. How about we try to keep the balance? Then we would be all better off I think, and “Made in Germany” or “Made elsewhere” wouldn’t matter so much anymore.

How to be German: Long-running cop drama 'Tatort'

Do you want to know how to be German?

Psychologist Sven Rudloff will be joining us each month - this time round, how one crime drama can trace the recent history of Germany and the impact it's had on the country’s culture!

Hello, my name is Sven, and I am a German psychologist. Long-time listeners may remember me from the first-ever “This Week in Germany” Extra interview. Normally I produce “Viva Britannia”, a German language podcast where I explain all things British to German listeners. From now on, I will also regularly contribute to “This Week in Germany” and explain some German things to you English-speaking listeners.

This time I want to delve into one of Germany’s cultural institutions, the television programme “Tatort”.

“Tatort” simply means “crime scene” - one of the rare occasions where the German word is actually shorter than the English one. The “Tatort” is the longest-running German language police procedural. It started in 1970, and this very Sunday episode number 932 airs on public television.

The “Tatort” owes its unique production concept to the setup of public broadcasting in West Germany after the Second World War. Almost every federal state in Germany has their own broadcasting institution that produces regional radio and TV programmes. In 1950, the ARD was formed: By name literally a consortium of these regional public broadcasters of Germany. Since then, the consortium together is responsible for the programming of Germany’s national TV Channel No. 1, called “Das Erste”. In 1963, a second public TV broadcaster was formed, called “The Second German TV”, or “Das Zweite”. You see, Germans are not very subtle with naming things after all.

In 1970, Channel 2 was quite successful with a new police procedural, so Channel 1 had to come up with some kind of counter-offer. TV producer Gunther Witte suggested a series of Sunday night crime movies, to air at a quarter past eight right after the main evening news. The criminal cases had to be realistic and believable, and the series should focus on the police detectives as the main characters. Every episode had to be self-contained and the case to be resolved at the end, at least in some way.

In order to spread the financial burden of such an undertaking, every regional broadcaster in the ARD consortium should contribute their own productions to this series. In turn, they got the opportunity to put a regional twist on their productions, so every federal broadcaster got their own team of police inspectors that investigates crimes in one of the region’s cities, and often with a local flair. Larger broadcasters even got the opportunity to contribute more than just one police team.

At first, the consortium was not convinced, but eventually they signed off on this concept. And it should prove very popular - before private broadcasters entered the German scene, some “Tatort” episodes reached 25 million people or 70% of Western German viewers at the time. Even today, the “Tatort” still accounts for some of the most-seen TV programs in any year.

Sure, over the past 45 years, there were quite some changes. In 1971, Austria joined the “Tatort”, and in 1990 the first Swiss detective entered the scene. Due to the German reunification, the landscape of regional public broadcasters changed, and new teams from the East of Germany started to work on their own local “Tatort” cases.

Still, all the elements of the basic concept that I mentioned earlier hold to this very day. About 35 “Tatort” episodes are produced every year, and are usually broadcasted on a Sunday evening. During longer public holidays like Easter or Christmas, the broadcast sometimes moves to a different day of the week, but it’s always on the evening of a work-free day. The opening and closing titles and the title music of the “Tatort” have remained essentially unchanged in all these years. You can indeed call it a German cultural institution.

The “Tatort” is one of these TV programmes you simply grow up with. Some Germans watch it every time, but many simply have their favourite police teams they follow. In total, about 80 different teams have been active so far, some for many years, and some only for a few episodes. I, for example, have known the “Tatort” police teams from Munich and Cologne for about two decades, and even the quirky team working in my former university town Münster has been around for more than ten years now. This specific team, by the way, is the most successful at the moment in terms of viewership.

Traditionally, well known TV actors take up the role of a “Tatort” detective, but sometimes both future film stars are made in “Tatort”, and sometimes quite successful film actors are tempted to return to TV by this series. Even for them the working time that the “Tatort” demands is manageable - as there are only about 35 episodes every year, and there are almost 20 different teams at work at the moment, this means that you only get one or two episodes per team in every given year.

Especially in the early years, the “Tatort” detectives were often lone wolves who may have had a support team but were still the sole protagonist in the story. Over time and especially since the 1990s, it’s usually two similar-ranking police officers working together. In case of the much loved Münster team that I mentioned, it’s scruffy police inspector Frank Thiel one one hand, and his accidental partner-in-crime-solving, the stuck-up forensic scientist Karl-Friedrich Boerne - who also happens to be Thiel’s landlord. They don’t really like each other, but they always end up hunting murderers in the picturesque surroundings of Westphalia.

The “Tatort” cases should be realistic, and so over the years many hot topics of the time found their way into the series. Already the very first episode - called “A taxi to Leipzig” - covered a case spanning both West and East Germany. The first scandal occured in 1977 when the series depicted the relationship between a school girl and her teacher, including nude scenes of actress Natassja Kinski, who was only 16 years old at the time. For her, the daughter of infamous Klaus Kinski, it was the start of an international career, and today this episode is one of the classics and no longer seen as scandalous. Similarly, social topics like homosexuality and transgender, political topics like the wars on the Balkans or the Middle East, or simply the impact of the German reunification on the country - they all have influenced and been depicted in “Tatort” cases.

So if you are interested in a piece of enduring German TV history, start watching. You don’t have to know the history of the different regional police teams, as each episode is self-contained. You need however to understand German - individual episodes have been exported to up to 50 countries, but to my knowledge, there is no translation for every single episode. After all, the “Tatort” is more a lose collection of 90-minute-long crime movies, and not a continuing TV series. But for Germans, it’s simply one of those things.

Sven Rudloff is a psychologist and producer of the German-language podcast about the United Kingdom, Viva Britannia.