How Great of an Advantage Do Low-Price Leaders Like Walmart and Aldi Have?

Amazon and Aldi appear be fighting it out over the title of the U.S.’s retail low-cost leader. How important is it?

Last week, Amazon declared itself “America’s low-price leader,” citing analysis from Profitero showing that its average prices are 14% lower than 23 online U.S. retailers. Among some key categories, Amazon prices were pegged at more than 5% lower versus its nearest competitor in fashion, packaged foods, home furniture, and books -- and 4% lower than close competitors in beauty, electronics, and household supplies.

According to a survey of Amazon users taken in 2021 by delivery management solutions provider Convey, however, the top reason to shop at Amazon is fast, free shipping (73%), followed by “I am an Amazon Prime member” (67%), an easy and convenient purchase process (58%), a broad selection (49%), and an easy returns process (43%). Best pricing came in sixth (42%).

Aldi earlier this year released its first-ever Price Leadership Report, confirming the limited-assortment grocer has the “lowest prices of any national grocery store.” The analysis conducted by Ernst & Young Quantitative Economics and Statistics Group (QUEST) found Aldi saves shoppers up to 36% on an average household's shopping list.

The report likewise highlighted other factors driving Aldi’s appeal, including a survey showing consumers feel the grocer’s selection outranks the competition by two-to-one, and 76% believe Aldi’s brands are just as good as pricier national brands.

Walmart and Costco are also seen as gaining a benefit as perceived low-cost leaders at retail.

Aldi, Walmart, Costco, Amazon All Fighting for Price-Conscious Consumers

A 2023 survey from Mercatus, commissioned by consultancy Brick Meets Click, found 80% of shoppers choose to shop at a hard discounter like Aldi because of its low prices -- compared to 72% who said the same about a big-box store like Walmart or Costco. Only 42% choose to shop at a traditional grocery store because of its low prices.

One advantage for traditional grocers is often being physically closer to consumers. Of the respondents, 77% chose to shop a regional grocer because of convenience, versus 64% for mass and 56% for hard discount.

The survey also found that, although Walmart and Aldi were found to have lower prices than regional grocers on an average, savvy shoppers believe they can save more at regional grocers by shopping weekly deals and waiting for sales.

Among deal-seekers, Mercatus’ survey found 41% go to traditional grocery stores to take advantage of the extra ways to save money, versus only 23% going to hard discounters and 29% to big-box stores. The report suggested regional chains could likewise explore incentives to help save consumers money when shopping online.

“Regional grocers are well positioned to help their customers save time, and they can also offer customers additional ways to save money based on how they want to shop,” explained David Bishop, partner at Brick Meets Click. “Strategies like having lower prices compared to third-party marketplaces, price protecting ad items, offering digital coupons, and offering graduated fees based on pickup times are all ways grocers can help their customers save money when shopping online.”