Private label grocer Aldi is winning brownie points for its low prices among Millennial shoppers, large families and seniors looking for lower prices on food and consumables.
Preferring organic, Reeves Hornibrook of Fayetteville recently noted on Facebook that Whole Foods was “breaking her wallet” but then she heard the local Aldi had a large selection of organic products and the savings added up to about 50%.
A proprietary pricing study completed in mid-January by Deutsche Bank’s Paul Trussell found Aldi to be “the “clear price leader” when compared to Wal-Mart Stores. The study looked the prices of 43 items and it was conducted in northern New Jersey and Orlando, Fla. Trussell found Walmart to be 13.5% more expensive on average than Aldi.
Aldi led in the food and household/personal care product categories, with the food basket at Walmart U.S. costing 14.3% more than Aldi, and the household/personal care basket at Walmart U.S. was 12.7% more expensive.
“When looking at only private label SKUs (30 items), Aldi’s price advantage grew further,” Trussell noted. “The private label basket was on average 21.4% more expensive at Walmart than at Aldi. Taking into account national brands, which included 10 items, Walmart was only 2.5% more expensive, on average.”
Aldi’s lean model includes small formats, no-frills merchandising. The items are are displayed in cardboard boxes often stacked on pallets. There is no need for cart attendants as shoppers are asked to reserve a cart for 25 cents, which is given back when the cart is returned.
Shoppers must also provide their own shopping bags, but in many cases shoppers simply pick up empty boxes they see in the store to gather groceries and often consumers put the groceries directly in the car with no bags or boxes. Aldi is able to pass these operational savings to the customers in the form of lower prices. Aldi stores average about 10,000 square feet and offer a limited assortment of around 1,300 of the most commonly-purchased grocery and household item with an emphasis on private brands.
The limited item count is a complaint often made about Aldi and also that about 90% of the items are private label. That said consumers like Mary Ann Moffett Jones of Rose Hill, Kan., said she loves Aldi’s Greek yogurt and “It’s just as good as the more expensive brands.” Jones was one of the consumers recently posting on Aldi’s Facebook page.
Talk Business & Politics recently completed its own pricing survey comparing prices from the newly redesigned Aldi in Rogers against Walmart Pickup Grocery, which allows consumers to order items online and pickup at store location of their choosing.
Looking at 30 items ranging from meat, produce, dry grocery, dairy and non-edible consumables the basket at Aldi came to $62.47 while the same private label items at Walmart cost $83.89. The overall savings at Aldi on this particular shopping trip was $21.42.
Dairy was the category with the biggest savings of 42%. While the large container of plain Greek Yogurt was similarly priced at both stores, there were big savings on milk, eggs and cheese. A dozen large eggs cost just 49 cents at Aldi compared to $1.97 at Walmart. A half gallon of 2% milk cost 59 cents at Aldi compared to $1.85 at Walmart. The large bag of 2% grated Mexican cheese was $2.19 cheaper at Aldi. It’s important to note that the milk and egg prices at Aldi were part of a local promotion and there was a limit of 2 dozen on the eggs.
The Deutsche report showed Walmart and Aldi to be competitively priced on a gallon of 2% milk at $3.34 and $1.74 on a dozen of large eggs in the two markets it surveyed.
There were also some substantial savings on meat purchased at the Rogers Aldi. A package of Polish Kielbasa, fresh center cut pork chops, one pound of 85% lean ground beef and a 2.5 pound bag of uncooked frozen chicken tenders cost $14.51 at Aldi. Nearly identical items at Walmart cost $19.25. The biggest savings came on the bag of chicken which was 63 cents per pound cheaper at Aldi. The pork chops were $1.22 more expensive at Walmart and the hamburger meat (80% lean) cost $1.20 more. There was also a $1 savings on the sausage at Aldi.
Fresh produce, an area where Walmart U.S. CEO Greg Foran has placed much emphasis over the past year, still shows Aldi to have lower prices on six of the seven items purchased. Sliced tomatoes were the only item on the list competitively priced at both stores — $1.99 at Aldi compared to $1.98 at Walmart. The savings on fresh produce, which included organic mixed greens, came to $3.33 at Aldi. Cucumbers were about 30 cents cheaper each, avocados were 30 cents cheaper each and there was about $1 price difference in the organic mixed greens at Aldi. A 5-pound bag of Russet potatoes was 16% cheaper at Aldi and fresh zucchini about 38% less expensive than Walmart. The head of iceberg lettuce cost $1.15 at Aldi versus $1.49 at Walmart.
Dry grocery was the area where Aldi and Walmart were most competitive. Walmart was cheaper on taco shells and pasta sauce, but the overall baskets dry grocery savings totaled $4.94 at Aldi. Cashews were $1.79 less expensive, there was a $1 savings on corn tortilla chips with marginal savings on items like a loaf of oat bran bread, walnuts, organic honey, 4-pound bag of sugar and cooking spray.
In the Deutsche report there were hefty savings on items like vanilla wafers which were 43% less expensive and raisin bran cereal was 33% cheaper than at Walmart on average.
The savings at Aldi are not just found in food. Non-edibles items like 2-pack of paper towel, 3-pack of scrub sponges and a box of 80 count dryer sheets cost a total of $5.67 at Aldi, compared to $8.86 at Walmart in Northwest Arkansas.
The Deutsche report looked at Tide detergent (75 oz bottle) which was 50 cents cheaper at Aldi for the exact same product. Pantene Pro-V daily moisture renewal shampoo was identically priced at $3.84 at each retailer as was the Secret powder deodorant at $2.47. The Crest complete (whitening Scope) toothpaste was 22 cents cheaper at Aldi. Walmart was 5 cents less expensive on liquid hand soap but evenly prices or more expensive on the other items checked by Deutsche.
Aldi also features at least one or two aisles of general merchandise that changes every week or so. Items like folding card tables, kitchen utensils, laundry baskets, car jacks, toys and even apparel can routinely be found on these treasure hunt aisles.
Aldi may not be the only place consumers shop given the limited items but the no-frill grocer continues to expand its U.S. footprint. Aldi USA operates around 1,600 stores in 35 states. In March 2016 Aldi opened its first stores in Southern California and plans to operate nearly 2,000 stores by the of 2018. Though Aldi has had a U.S. presence for several decades it hails from Germany originally where it and its primary competitor Lidl have wreaked havoc on Walmart ASDA in the United Kingdom and other retailers across Europe.
Lidl is in the midst of launching its U.S. division along the eastern seaboard states with its regional headquarters under construction in Fredericksburg, Va., and distribution network underway in North Carolina. Lidl has eyed 80 store locations from Georgia to New Jersey and plans to invest $200 million in Virginia alone by 2018.
Carol Spieckerman, CEO of Spieckerman Retail, warns that U.S. retailers should take notice of the looming threat Aldi and Lidl present in the next couple of years.
“Be afraid, very afraid. Lidl presents a looming threat to any and all U.S. grocers and dollar stores. The combination of Aldi and Lidl is a market share-grabbing nightmare,” Spieckerman told Talk Business & Politics. “European retailers such as Tesco, Sainsbury’s and others learned this the hard way after initially underestimating the potential impact of Aldi and Lidl’s proliferation. Hopefully U.S. retailers won’t make the same mistake. Lidl should be expected to hit U.S. shores with a big bang.”
She said in the U.K. Aldi and Lidl doubled market share in one year and together, now command 10% of the grocery market. She expects Lidl won’t drag its feet once its U.S. supply chain and operational infrastructure is up and running.