I think the Portuguese model cited above makes a lot of sense — better quality, better assortment, better value and perhaps a nicer place to shop.

Differentiation, selection and customer service will be the best ways to counter Aldi and Lidl. This may be hard for traditional grocers, but it is possible. The last thing competitors should do is have a fight to reach the lowest price.

Aldi can’t take the place of conventional supermarkets because there are so many SKUs they don’t carry. (That’s also true of Trader Joe’s.) That said, the allure of 70 cent cans of tuna and 99 cent imitation Cheetos is definitely there. Customers who are willing to put up with the absence of bags and atmosphere will continue to shop there. Grocers would be wise to hedge their bets by having a variety of formats.

I don’t accept the article’s premise. I’d like to, since enough people are saying it that I’d like to think it’s true … but it seems to me that when Aldi goes into bigger towns than its 1400 store base, it just isn’t attractive. I would feel better about the article if it talked about dollar stores instead of Aldi and Lidl. That’s who is taking share away from grocers like Walmart. And speaking of Walmart, that’s what caused the differentiation that the author describes above. Most surviving grocers have established a value proposition beyond “cheap food.” The cheap food guys all went down in the Walmart era. As you know, terrestrial retailing’s mantra is “location, location, location.” Which makes it hard for me to understand why Aldi opened a store in Miami in a Kmart parking lot, 20 blocks from Whole Foods and Publix (and miles from the nearest Walmart or Target). It didn’t exactly shout “Shop here instead of those other places.” Long story short, I don’t understand who will shop at Aldi… Read more »

The recent inclusion of accepting credit cards by Aldi is a sign that they too are in need of more business. This expansion of payment terms means they are willing to pay for a means to move inventory. Maybe even with help from their vendors. One-stop shopping is not so practical as when there was a substantial sized middle class in America. The economic depression that continues under the media spin has seen to the demise of this class and lower earnings for the poor as well. The means to address the need for increasing sales will have a lot more to do with price selection instead of brand selection for some time to come. Americans being the type of people they are will seek to attain a higher standard of living and even splurge once in a while. What is seen as luxury and splurging is in no way comparable to what it was in 2003. Retailers must understand what is out there to sell to and what the customers can handle within their… Read more »

I agree with Mike Paglia. The more distinct the differentiation, the better U.S. traditional grocers can stave off the erosion of shoppers to off-shore discounters. And that differentiation must (IMHO) include the re-invigoration of human assistance and interaction across the shopping journey. Shoppers should feel the difference.

As the income and therefore spending gap widens between the haves and the have-nots, traditional grocers must be able to attract the 60 percent of have-nots into stores, not just the 40 percent who have more disposable income.

It’s wise to consider how shoppers feel when shopping discounters to save money. Aldi has made strides in making people I know feel smarter by shopping there, especially for organics. That’s a win. The more the newcomers focus on these aspects, the better they will do.

You know, when I was but a callow lad the first thing I “learned” about the supermarket industry was that Aldi was doomed to failure. That was during the Lincoln Administration. Get over it people! There is no reason to write this same article every five years for eternity. They are here to stay because they have carved out a profitable niche which they have defended and expanded for decades now. How much of a threat are they? A big one if you are a price gouger selling inferior products, but if you are a modern fallen supermarket I wouldn’t lose a lot of sleep. Contrary to what you read in trade communications or listen to at industry gatherings there are a lot of poor folks in America and they need decent quality food at a decent price. Want proof? Overlay some graphs of Aldi’s growth with the decline of the middle class. Look … it’s not all lattes and organic kale out there. There are plenty of folks just hoping for dinner. So unless… Read more »

The worst thing they cold do is try to go head-to-head, even on a partial level. The best thing they could do is enhance what they are already doing and do it better. The customers are different customers. Like every business, understand who your customers are and why they are your customers and not someone else’s. Trying to get the other guy’s risks losing your own.

Do nothing different. Aldi and I assume Lidl are in a world of their own. There is no way to compete on price so don’t waste time trying. We’ve seen it done before and Aldi just makes fools out of the competition. Find another niche.

Always avoid a price war unless you have a sustainable competitive cost advantage. Conventional grocers need to get out of the black hole, big middle. No need to be Aldi- or Lidl-like, nor Wegmans- and Publix-like. Instead, decide what your strengths are relative to your competitive array and develop a strategy based on them.

Options might include: unique assortments, terrific fresh departments, home delivery, front-end checkout convenience and speed, health and wellness focus (e.g., partner with registered dietitians, do healthy cooking demos or classes), be the community leader, etc. In short, discover your differential advantages, fund them and tout them.

Having dealt with Aldi for close to 20 years or more, it is impossible to compete head-to-head on staples, and if store owners disagree then fine. There are tons of poor people in my county and they flock to Aldi to stock up on cheap canned goods, produce and snacks, and they are not going to change their habits no mater how hard I try. So what do you need to do is the question? Rethink how you lay out your store and work extremely smart on perishable deals, which Aldi can not compete on, and you can at least get customers to shop your store. Great service comes at a price, but if you decide to cut back to almost little or no service then you better be prepared to watch your business shrink. I see Aldi ads all he time and scratch my heads wondering how in God’s name I can even come close to their prices, especially during all the holidays. Take advantage of premium brand name products like Miracle Whip, Philly… Read more »

Aldi prices (in the U.K. at least) are approximately 25 percent less than a full service grocer such as Tesco or Sainsbury. Because the business models are so different (hard discounter v. full service supermarket), the supermarkets are never going to close the price gap.

And once you have shopped at Aldi or Lidl a few times, you really notice the price differential if you go back to one of the main supermarkets.

Aldi and Lidl attract people from the wealthier demographics, so it’s not a case of their shoppers being people on a budget. it’s a case of shoppers deciding they can have equal or better products at a significantly lower price than the main supermarket chains.

All the answers about fighting back using differentiation or customer service miss the point – it is the price differential that is allowing Aldi and Lidl to grow market share. And it is the price differential that stops people switching back.

It’s like a ratchet — the mechanism only works one way.

The reality of the “weekly grocery shop” is that baskets will continue to be split among several providers.

As an example from a Florida shopper, Publix may be a “home base,” but there are advantages to buying specific items at lower prices via Walmart and Aldi. A monthly Costco visit might satisfy the need to buy bulk or other specialty items. For others with brand affinities in play, Whole Foods and Trader Joe’s will merit an occasional visit.

If you agree with this scenario, the question is how each provider can find incrementality in basket size. Therefore the answer is not so much “how” to combat an overall threat from Aldi and Lidl, but how to preserve as much basket share as possible in the future as the shoppers are swayed by a plethora of choice.

Grocers should focus on differentiation and personalization to meet the threat presented by Aldi and Lidl. These new operators are similar to Walmart with their emphasis on reasonable quality at rock-bottom prices.

To compete, grocers will have to provide shoppers with differentiated products and a differentiated experience. Furthermore, grocers need to customize their offering and promotions to the needs of their top shoppers. Using shopper data to create more relevant offers will enable grocers to maintain the loyalty of their top shoppers.

We have been supplying nonfood products to the German discounters for a long time and could observe with close view how specially those both chains evolved. We are convinced that they will become very visible also in the US market.

As the format is completely different from other retailers in the US, it seems hard to fight an enemy where only a few understand how it really works. To compare their stores with Walmart or Target is an example of this. They have nothing to do with this kind of retail.

And a big mistake would be in believing that they sell “cheap” items. The contrary is true. One of the main reasons for their success in Germany, Europe, Australia and now starting in the US, is and has always been the unbeatable proportion of quality and price. That’s pretty different.

So what to do? Maybe try to learn from them. Pay attention to a similar strategy on quality and have an eye on nonfood.

There’s no denying that Aldi and Lidl pose a threat to US grocers just as they have and do here in the UK. In the UK, Aldi and Lidl don’t stock recognised brands. In the early days this put a lot of people off, but slowly, people have come to realise that whilst unfamiliar, the quality of their stock is actually quite good. Coupled with the discount price point and they have developed quite a reasonable value proposition rather than being seen as cheap and nasty. The recession also helped to break down barriers to who was prepared to shop where and a savvy shopper has emerged who is happy to include the discounters in their repertoire. Sure you can’t necessarily get everything you want all the time, but for the majority of missions suitable products are mostly available and the smaller formats fit well with the trend towards smaller and more frequent missions, which Aldi and Lidl are both encouraging with the introduction of very good in-store bakery and fresh offers. As for service,… Read more »

Aldi just significantly upped their convenience game with customers big time by starting to accept credit cards. How this may affect their prices over time remains to be seen. But in the meantime, they’ve just made it even harder for the middle of the road grocer to compete. Having to bring one’s own bags to Aldi (or pay for them) may have seemed weird 15 years ago. But by now, haven’t most of us been trained to bring reusable bags into a store whenever and wherever we shop for groceries? The fresh meat areas overseen by a real butcher, non pre-packaged deli departments and the prepared hot food sections of traditional and upscale markets will continue to be good differentiators to attract customers who can afford it and enjoy the convenience. May I also just say how glad I am that Tony O. comments here. It is so useful to get the insights of somebody who actually operates a grocery store in this environment when most others of us are positioned as advisors, observers and… Read more »

It’s really quite simple: In ANY store in the world, of ANY kind, more people leave the store with a single item purchase than ANY other number! For supermarkets, HALF the shoppers leave with FIVE or fewer items. Smaller stores eliminate more than half of the barely functional “PARKED CAPITAL.” What large stores just can’t seem to understand is that it is those SMALL baskets, that drive the TRAFFIC that over time, gets the fewer, but all important, LARGE basket trips.

These are stark facts, readily observable, in any store’s transaction logs. Quick! Nobody look! Why be one of those moving to fact driven retail? Why not stick with the crowd fighting rear guard actions — like closing a lot of stores, in preparation for sale or bankruptcy?

How many of your consumers fall into the lower middle class or shrinking middle class? If that is not your most valuable consumer set, you are not competing with Aldi or Lidl. If that is your most valuable consumer set, then you need to provide better quality food in the right assortment at a competitive price to Aldi or Lidl with a good shopping experience.

This is a lot of words to say focus on your most valuable consumers and provide the right products at the right price with the right shopping experience. Mimicking another retailer is not the solution.

Differentiation through assortment, service, customer experience, and fresh will always be the “levers to pull” to continue to attract customers to any operation. Sharper price points, deployed selectively and in a more limited fashion, through promotion and long term deals can also blunt the pricing differential against these discount stores.

That said, understand that these stores compete on price with private label brands; an area that conventional grocers have utilized to protect margin in their categories. If conventional grocers bring down their private label prices, their margins will be greatly impacted, not only on these category margin protectors, but also on their brands. Price spread management is key to a proper mix of private label — brand sales/margin. So, if private label pricing goes down, brand pricing will need to follow. This will create a deflation in sales that will be near impossible to make up, and will obviously drag the profit dollars down with it. So, the pricing lever pull is fundamentally “off the table.”

Having watched the German discounters grow in the UK market, I can concur with much of the above … however, an incumbent launching a discount format is doomed to fail as it can only dilute volumes and raise complexity — exactly what the discounters want in their competitive set. These retailers will use global scale and a lean business model to out-Walmart Walmart. Their stores will not be for every shopper, or every shopping trip, but they will change US food and drink retailing forever.