The average American grocery store carries about 30,000 SKUs. Aldi carries about 1,650.
That single ratio, more than anything else, explains how a quiet German discount chain run for decades by a pair of reclusive billionaires is currently the fastest-growing grocer in the United States.
In 2024, Aldi's per-square-foot revenue ran at roughly $662 — meaningfully ahead of Walmart's $418 and Dollar General's $223 combined. The brand opened roughly 100 new US stores in the past year and has set a target of 800 more by 2028. None of this is happening because Aldi has better products than Walmart, lower prices than Costco, or a cooler brand than Whole Foods. It is happening because Aldi understood, before almost any other retailer, that fewer choices sell more goods.
The behavioral economics behind that sentence is more interesting than most people realize.
The Albrecht Brothers' Original Insight
Karl and Theo Albrecht took over their parents' small grocery store in Essen, Germany, in 1946. Postwar Germany had almost nothing on the shelves and almost no money in customers' pockets. The brothers' insight was that under those constraints, the right move was not to compete on selection or service. The right move was to strip everything out — packaging, displays, advertising, staff, choices — and pass the savings to the customer.
They opened the first store under the Aldi name (short for Albrecht Diskont) in 1961. By 1971, they were the wealthiest brothers in Germany and famously elusive — Theo was kidnapped that year and held for 17 days before the family paid roughly seven million Deutsche Marks in ransom. The Albrechts split the company shortly after into Aldi Nord and Aldi Süd, reportedly over a dispute about whether to sell cigarettes. (Karl thought they attracted shoplifters; Theo wanted the margin.) Trader Joe's, the American cult-favorite grocer, is owned by Aldi Nord — most American shoppers don't realize Trader Joe's is, organizationally, Aldi.
What the Albrechts intuited in 1961 — and what behavioral economics formally documented forty years later — is that the cognitive cost of choosing is itself a tax on the customer.
The Cognitive Load Tax
In 1988, an Australian educational psychologist named John Sweller published a paper introducing Cognitive Load Theory. The argument was that human working memory is small (Sweller estimated 4–7 chunks of information at a time, in line with Miller's classic 7±2 finding from 1956), and any task that exceeds that capacity produces stress, worse decisions, and eventually disengagement.
Applied to a grocery aisle, this means something specific. When a typical shopper walks into a Walmart and encounters 280 varieties of salad dressing, the information processing demand of comparing them — read the label, check the price, check the brand, weigh against your dietary preferences, multiply across 30 categories of items — quickly overwhelms working memory. The shopper either picks something semi-randomly, defaults to whatever's familiar, or — and this is the part that matters for Aldi — delays the decision and feels bad about the whole experience.
Sheena Iyengar's 2000 jam study at a Menlo Park grocery store (the one I've referenced in earlier pieces) documented the same mechanism in reverse: when shoppers were presented with 24 jam varieties, they were ten times less likely to buy than shoppers presented with 6. Barry Schwartz built The Paradox of Choice around the same finding. Aldi's 1,650-SKU approach is, in a very direct sense, a structural application of Sweller, Iyengar, and Schwartz before any of them had published.
The shopper doesn't have to compare 280 salad dressings. There are four. The shopper doesn't have to compare 50 ketchup brands. There's one. The cognitive tax of the grocery trip drops by roughly 95%.
The "Limit 6" Sign
There's a small behavioral move Aldi uses at the milk case that's worth describing in detail because it's almost too clean.
Aldi sells milk at a loss. The cheap-milk strategy is a textbook loss leader — milk is used to pull customers into the store, with the gross margin recovered elsewhere. But Aldi also posts a small sign on the milk case that reads, in red letters, "Limit 6 Please."
The sign does two jobs simultaneously. First, it signals scarcity: the customer's brain reads the limit as evidence that the milk is in demand or running low. Second, it provides an anchor. The number 6 in the customer's field of view becomes the reference point for "how much milk to buy" — even though almost no household needs six gallons. Customers who came in for one gallon end up buying two, occasionally three. The average sale per customer rises, the milk loss-leader loses less money, and the rest of the basket is unaffected.
Anchoring was formalized by Amos Tversky and Daniel Kahneman in 1974 — they showed that numerical anchors influence subsequent quantitative judgments even when the anchor is provably irrelevant. The "Limit 6 Please" sign is a low-stakes application of one of the most replicated findings in behavioral economics. It costs Aldi nothing. It nudges average basket size measurably upward.
The Private-Label Trick
The other half of Aldi's playbook, which has more public-facing brand consequences, is that they sell almost exclusively private-label goods. Walk into an Aldi and the Red Thunder energy drink looks distinctly like Red Bull. The "Knock Your Socks Off" cereal looks distinctly like Frosted Flakes. The Belmont ice cream looks distinctly like Häagen-Dazs.
This isn't legal trouble waiting to happen. It's a deliberate exploitation of what marketing researchers call category visual codes. Phil Barden in Decoded walks through the fMRI evidence that consumers process packaging cues in milliseconds, well below conscious attention. By making private-label products look categorically like the leading brand, Aldi gives the customer's System 1 brain (Kahneman's fast, intuitive system) a fast yes-or-no judgment without forcing System 2 to deliberate.
The economic consequence is that Aldi captures 30–40% of the margin a name-brand product would charge, passes much of it back to the customer as lower prices, and keeps the rest. Trader Joe's runs the same model. So does Costco's Kirkland brand. The mechanism is the same: visual mimicry as a Cognitive Load reduction tool.
What This Means For The Rest Of Us
If you're not a grocer, the Aldi case is still worth understanding because the mechanism — cutting choices to increase sales — applies almost everywhere humans make decisions under cognitive load.
Stripe's pricing page lists three plans, not eight. Apple sells four iPhone tiers, not forty. Costco runs roughly 4,000 SKUs against Walmart's 100,000+ and earns substantially higher per-square-foot revenue.
The Albrechts didn't read Sweller or Iyengar or Schwartz. They figured it out from running a grocery store in postwar Germany with empty shelves and broke customers. The behavioral economics caught up later. But the underlying truth — that choice is a tax, and that customers will reward you for paying that tax on their behalf — was operationally proven before the academic literature even existed.
If you're trying to grow a business by adding more products, more features, more options, more variants — ask yourself the Albrecht question. Is the cost of these new choices being paid by the customer's cognition, or by the business's complexity?
If it's the customer's cognition, you're slowly draining their willingness to come back.