Aldi Launches a Price War Against Walmart
Back in my 20s, I met a guy who was working for a German supermarket chain I had never heard of called Aldi. When I asked him to describe it, he referred to it as kind of like a “cheaper Trader Joe’s.” The Trader Joe’s comparison makes sense since the same company owns both brands, but the word that’s always stuck with me is “cheaper.” Aldi has always defined itself by being cheaper. The name is even short of “Albrecht Diskont” – the founders’ surname and the German word for “discount.” And now, Aldi in the US is putting that reputation on the line, attempting to undercut the best known discount retailer in the country: Walmart.
Based on a conversation with Jason Hart, CEO of Aldi US, Reuters outlined his company’s aggressive ambitions for expansion and growth in the American market. At the heart of the plan is using more low-cost private label products to pull price conscious shoppers away from places like Walmart, as well as a $1.6 billion investment to remodel 1,300 stores and add 400 more.
“We are re-merchandising, remodeling, enhancing our product range and are focused on gaining volume so more customers start their shopping at Aldi and we are able to complete their shopping lists more so than we have in the past,” Hart told the news outlet.
The impending fight for title of low-cost king could mean some serious cheap eats for customers. Aldi currently boasts that its own figures show that the grocer has prices 21 percent lower than its competitors. But at the same time, Reuters reports that Walmart is also attempting to undercut Aldi by as much as 15 percent in many markets. Granted, comparing the two companies can be a bit tricky: Only about 30 percent of Walmart’s supermarket products are store brands, whereas 90 percent of Aldi items are from its own private label. But if you’re not worried about brand names, expect to find extra cheap goods in both places.
Meanwhile, Aldi’s $1.6 billion investment in its stores is also intended to drive down the chain’s prices. “The remodels are aimed at increasing our volumes which means more purchasing power that will help us lower prices further,” Scott Patton, Aldi's vice president of corporate buying, was quoted as saying.
“Aldi is disrupting the sector the way Wal-Mart did when they started,” one retail consultant told Reuters. Uh, is that supposed to be a good thing or an ominous warning??