Two highly competitive German grocery stores, Aldi and Lidl, are plotting to take over the US — and that’s terrible news for Wal-Mart, Kroger, and Whole Foods.
Aldi and Lidl have completely upended the UK grocery market over the last several years by sending the nation’s largest supermarkets into a crippling price war that has gouged 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,” Andy Clarke said last month after Wal-Mart-owned Asda 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 $US3 billion expansion in the US, bringing its total number of stores to 2,000.
Immediately following Aldi’s announcement, Lidl revealed that it had opened a US headquarters in Virginia in preparation for its own US launch, the Journal points out.
Aldi and Lidl have become such a major threat to the grocery industry because of their insanely cheap prices.
In the US, where Aldi has roughly 1,400 stores, prices are roughly 22% cheaper than Wal-Mart’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, bag their own groceries, and at Aldi, customers pay a 25-cent deposit to use carts. The deposit is refunded 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 might not seem like Aldi and Lidl could compete with a high-end chain like Whole Foods, which attracts higher-income customers.
But Aldi and Lidl are now starting to offer “fancier” foods, like artisanal cheeses and smoked salmon, according to the Journal.
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