According to the founding myth, the original inspiration behind Aldi were military logistics. The whole thing was designed to be efficient.

Only stock predictably fast-selling stuff, for easier logistics and less warehousing. Don’t stock wares into shelves, just dump the whole pallet or box on the floor to save on labor costs. Sell only your own generic brands so you can dump your supplier for a cheaper one. No big advertising campaigns, just print some leaflets and distribute them yourself. And then they massively expanded to benefit from economies of scale.

In Germany, in response to this, the competition created their own Aldi-style discounters with mostly identical prices and on average roughly equivalent quality, which are now everywhere. The other successful strategy is what Rewe did: This supermarket chain copied some of Aldi’s approach to cost-cutting, and is now a bit of a hybrid between a traditional supermarket and a discounter. Importantly, they offer similar price and quality own-brand product for most things an Aldi would sell, while also selling more expensive alternatives and having a larger inventory. Why go to Aldi when you can get same price/quality as Aldi, but also this thing and that other thing Aldi doesn’t have? No need to go to multiple stores.

Meanwhile Aldi and Lidl have expanded their inventory and become more supermarket-like themselves (my guess is computerized logistics made this easier to do cheaply, and they have to compete with Rewe).

One other thing that happened is that these very large chains can squeeze their suppliers with their massive buying power. They basically suck all the profit from the supply chain for the benefit of just a couple of superrich families (though this also happened in other markets with e.g. Walmart in the US.) Oh and they are militantly anti-union, but again the whole industry is.