The Ultra-Lean Grocer

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Aldi stores, like this one in Geneva, Ill., carry only staples like cereal.

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The company is also making a big push into Central Florida in places like Sanford, located about half an hour's drive north of Orlando. Sanford's economic-development director, Robert Tunis, had tried for years to lure grocers. The city's demographics are attractive: its population grew 27%, to about 50,000, from 2000 to 2006. Within a few miles of downtown, Tunis says, are households with annual incomes of $30,000 to $250,000. That's partly what has drawn big chains like Target, Wal-Mart and Lowe's. "You name the retailers, we've got them," Tunis says, "but we've been underserved by grocers."

He was among the first to arrive at the grand opening in late September of an Aldi store in downtown Sanford, next to one of Seminole County's largest shopping centers. Now Tunis is hoping other grocers will follow Aldi's lead. "There's really no equivalent at the moment," he says.

Aldi is able to carve a niche in neighborhoods that supermarket chains have neglected partly because its stores are typically just 10,000 sq. ft., far smaller than the 80,000-sq.-ft. palaces recently opened by Whole Foods and other big chains. The relatively small size and bare-bones operations have helped Aldi and fellow deep-discounter Save-a-Lot penetrate urban markets where real estate is generally more expensive than in suburban locales. "Both Aldi and Save-a-Lot are winning big time," consultant Bishop says, "because they have an extreme value proposition, which is appealing at a time like this."

Also compelling is Aldi's BYOB policy, which strongly encourages customers to bring their own bags. How? By charging 10¢ apiece for plastic ones.