Aldi takes low-cost fight to Wal-Mart

GERMAN grocery chain Aldi is trying to beat the world’s biggest retailer at its own game: low prices.

Already with 1 600 US stores, Aldi’s internal studies show its prices are 21 percent lower than its lowest-priced rivals, including Wal-Mart Stores, according to chief executive Jason Hart. He plans to maintain that gap going forward.

His strategy, previously unreported, centres on adding more private-label goods, which are a retailer’s in-house brands, to win over price-sensitive customers, and a massive expansion to further disrupt a US grocery sector that has seen 18 companies go bankrupt since 2014.

Hart’s plan calls for spending $1.6 billion to expand and remodel 1 300 US stores, and open 400 new stores mainly in Florida, Texas and on both coasts by the end of 2018. He also pledged Aldi would be willing to change prices more frequently to respond to rivals if needed.

“We are re-merchandising, remodelling, enhancing our product range and are focused on gaining volume so more customers start their shopping at Aldi and we’re able to complete their shopping lists more so than we have in the past,” said Hart, who added Aldi’s US sales have doubled in five years.

Though it only accounts for about 1.5 percent of the US grocery market, Aldi is growing at 15 percent a year, whereas Wal-Mart currently controls about 22 percent of the market and its US sales are estimated to grow about 2 percent this year, according to analysts.

Aldi’s growth potential has competitors taking notice. Reuters reported in February that Wal-Mart is running price tests in 11 states, pushing vendors to undercut Aldi and other rivals by 15 percent and is expected to spend about $6 billion (R81.22bn) to regain its title as the low-price leader. – Reuters

His strategy centres on adding more private-label goods, which are a retailer’s in-house brands.