By Jack Cumming
The opening sentence of the video was a grabber, “Aldi breaks most of the rules of modern retail.” Imagine a senior living enterprise about which the first thing that came to mind was, “[LongLife Community] breaks most of the rules of [senior housing].” My passion has been business, and my age has brought me into senior housing. Naturally, I watched the video looking for ideas that might help senior living providers, their residents, and their industry associates.
The Middle Market
For a long time, articles and postings about senior living have heralded not only the coming demographic wave but also the largely untapped middle market. For the middle market, the tendency has been to emphasize Active Adult 55+ and Margaritaville as what the middle market wants and can afford. It’s as if all middle-market seniors were heavy drinkers and golfers.
My insight is that we can find, in Aldi’s approach, a more suitable business model for the large, neglected middle market. Many of the operating principles that are driving Aldi’s growth can apply equally well to bringing senior living to the middle market. That doesn’t mean that more affluent agers won’t sometimes choose the more frugal offering. Think of all the wealthy people who shop at Target, always giving it a snooty French pronunciation, “Tar-zhay,” with emphasis on the second syllable.
Frugal Operations
From the outset, Aldi emphasized “no frills” to drive home its value proposition of low prices. After all, the name, “Aldi,” is derived from “Albrecht Diskont.” Albrecht was the surname for a German family’s grocery business, and “Diskont” translates to “Discount” in English.
Two brothers, Karl and Theo, took it over, introduced low prices and frugality, and then divided it into two corporations, Aldi Nord and Aldi Süd, to resolve a brotherly dispute. According to the video, Aldi’s watchword, at least for Aldi Süd, has been to question everything: “Does this reduce the total cost of serving the customer over time?”
The very name, “Aldi,” declares that the business offers quality (family reputation) at a discount. They don’t waste money on architectural and other frippery. They focus on giving value to consumers. In senior living, it could be branded to provide a similarly barebones offering with homestyle food, resident volunteers, and simple living. “Does life enrichment reduce the total cost of residency over time?” Answer, “No, residents could handle that for themselves.” And that’s just a cost-saving beginning.
Ownership Structure
Aldi’s unusual ownership structure is part of its unique business model. To begin, neither Aldi Nord nor Aldi Sud is a public corporation, nor are they not-for-profit. They are more akin to benefit corporations since continuity of employment for employees and long-term value for customers are driving principles.
Before World War II, Germans were known principally for frugality and industriousness. The Albrecht brothers, who created Aldi, were of that generation, and they served in the German military during World War II. Military values were derived from Prussian concepts. Among those values were loyalty, discipline, duty, readiness, and unit autonomy.
These values are implicit in many of the concepts that have allowed Aldi to thrive. It suggests what Germany might have been capable of if it had not pursued conquest, antisemitism, and German (Aryan) superiority. The Albrechts today are the wealthiest family in Germany, and they have global reach. Still, there is goodness in the “Stiftungen” (foundations, trusts, beneficences) which have the overall ownership authority.
Goodness As a Value
That “goodness” is evident in the practice of letting checkout clerks sit instead of having to stand all day, as is common elsewhere. Aldi’s employees are mostly happy with their treatment. Compare that with a Spectrum Cable store I visited recently. I asked an employee why they didn’t have stools. The answer: “We’re required to stand if there’s a customer in the store.” That’s the usual American norm.
Could following the abstemious values that have guided Aldi and made the Albrechts the wealthiest family in Germany help senior living better fulfill the industry’s mission? Could moving away from not-for-profit organization toward benefit corporations give the industry latitude to better serve its beneficiaries, the residents? These are questions that deserve serious conversation.
