Today: How two of the world’s richest men began with no money and built a global retail empire.
To learn what happened we go to 1945 as World War ll ends. Adolf Hitler’s Third Reich collapsed with millions of people dead and bombed out homes and offices, factories and shops just charred and flattened concrete piles of rubble.
Germany is in ruins, its money largely worthless and many of its people can barely get enough to eat or find a job, nor is there funding to start businesses. Hope is in short supply.
Two returning German soldiers, Theo Albrecht and his older brother Karl came home to Essen, in what later became West Germany, somber witnesses to war’s death and destruction, young men of 23 and 25 years of age. Essen too, like so much of Germany, was devastated.
Their parents owned a small grocery store and hired them there. But there were food shortages and food was rationed, as people stood in long lines each day hoping their ration stamps would be honored before the food ran out.
For the Albrecht family, it was vital to keep the store stocked and the brothers worked hard to do that, knowing many of the people in those lines had children and other family members to feed.
Money was so scarce, they had no choice but to run a no frills operation, no fancy displays, no advertising, just solid basic food and other essential items piled high, somewhat like Costco and some other discount retailers do today.
Meanwhile the Albrecht brothers were learning extremely valuable business lessons that would one day make them vastly wealthy. For their business practices gave them tight control of their inventory and also by running a barebones operation, tight control of their costs.
But even with no frills, shoppers loved their store and the Albrecht brothers opened a second store using profits from the first one. As it became profitable they opened another and then another. By 1950, as West Germany began to get back on its feet, the brothers owned 13 stores.
Rationing was over but they continued to run a no frills operation in small high volume stores. It kept their costs sharply lower than their competitors and it let them offer something then rare in Germany or Europe or in the U.S. or Canada, a discount operation.
Customers flooded into their stores to save money and by 1960, the Albrecht brothers had 300 stores.
It seemed nothing could stop them from attaining enormous success but then suddenly their retail empire and all they had worked for was put in peril. For tempers had flared as the brothers fought over whether to sell cigarettes.
But just when things seemed their darkest, cooler heads prevailed and they wisely resolved their differences by splitting the business in two.
Theo took the northern stores and kept adding more stores, expanded across northern Europe while Karl took the southern stores and expanded them across southern Europe and later to the U.S. and Australia. In 1962, they established the name the operations run under today, Aldi (short for Albrecht discount).
In 1966, Theo’s stores became Aldi Sud (South) and Karl’s stores became Aldi Nord (North) and although they were separate operations, the brothers combined their massive buying power to negotiate the lowest prices from their suppliers.
Both Aldis businesses became merchandising machines and to this day keep rapidly growing as they open one store after another.
In fiscal 2009, Theo’s Aldi Nord, owned by his family trust, had an estimated 5,200 stores which generated about $32.5 billion (25 billion euros) in sales. In the U.S., his family trust also owns the highly successful specialty grocery chain Trader Joe’s, which as of June, 2010 had 342 stores.
Karl’s Aldi Sud, owned by his family trust had an estimated 4,200 stores in Europe and about 1000 more in the U.S. with approximately $34.5 billion (28 billion euros) in sales.
As a result, business publications have ranked the brothers Germany’s two wealthiest people and place them among the world’s richest individuals, billionaires many times over.
But while people envy them for having so much money, it has its downsides. In 1971, Theo was kidnapped and held for ransom. For 17 gut wrenching days his life hung in the balance for even if he paid the ransom, which he did, he didn’t know if his kidnappers would free him.
Ultimately, the kidnappers did free him and they were later captured. But Theo, who was never a very public person, after that horrific incident lived in seclusion in heavy security with his family for the rest of his life.
But all in all it did remain a wonderful life and Theo was active in the business until his final years. In July of 2010 he passed away at the age of 88. He is survived by his brother Karl who is 90 and by his family, including his wife and two sons.
Theo is also survived by tens of thousands of employees and by millions of customers that shop and save money in his stores every day. And he is survived by discount retailers across the world who copied what he and Karl established in Germany’s worst times and those retailers also have numerous employees and save us money today.
Success Tip of the Week:
If you want to start a business on a grand scale but lack the money, do what the Albrecht brothers did. Start small and save your profits and reinvest them as you expand your business at first a little at a time.
Because Aldi Nord and Sud are privately owned, the store count and sales figures are from retail consultant Planet Retail.
In the next KazanToday:
The remarkable story of a man who overcame great obstacles in sports and in business with hard work and by convincing himself he would succeed and he did.