‘The worst storm in retail history’ is heading straight for Walmart, Kroger, and Whole Foods
Aldi and Lidl have upended the UK grocery market over the past several years by sending the nation’s largest supermarkets into a crippling price war that has dented profits, triggered layoffs, and sent the companies’ share prices tumbling, The Wall Street Journal reports.
The CEO of Asda, the UK’s second-largest grocery chain, has called the new competitive environment created by Aldi and Lidl “the worst storm in retail history.”
“When we set the plan, I don’t think anyone anticipated the market being in meltdown,” Asda CEO Andy Clarke said last month after the Walmart-owned company reported its worst ever quarterly sales drop.
Now Aldi and Lidl are targeting the US, where they hope to eat away at the market share belonging to discount chains, traditional grocers, and even high-end stores like Whole Foods.
Aldi recently revealed plans to open roughly 600 stores over the next three years as part of a $3 billion expansion in the US, bringing its total number of stores to 2,000.
Immediately after Aldi’s announcement, Lidl revealed that it had opened a US headquarters in Virginia in preparation for its own US launch, The Journal reports.
Aldi and Lidl have become a threat to the grocery industry because of their insanely cheap prices.
In the US, where Aldi has roughly 1,400 stores, Aldi’s prices are roughly 22% lower than Walmart’s, according to a price check.
Aldi and Lidl keep prices so low by limiting inventory to a lean selection of private-label items. Aldi, for example, carries just 5% of the inventory found in traditional grocery stores, according to Cheapism’s Raechel Conover.
Both stores are also investing far less in customer service and merchandising than traditional grocers.
They save money by requiring customers to bring their own shopping bags and bag their own groceries, and customers at Aldi pay a 25-cent deposit to use carts. The deposit is returned when customers return the carts, so Aldi doesn’t have to pay employees to round them up and return them to the front of the store.
The no-frills shopping experience isn’t just cheaper — it’s also highly efficient.
At Lidl, workers don’t have to unpack boxes of groceries to stock them on shelves. The products are delivered in boxes with an open side, so they can be thrown onto a shelf without being unpacked, according to The Journal.
It may not seem as if Aldi and Lidl could compete with a high-end chain like Whole Foods, which attracts higher-income customers.