German discount grocer Aldi aims to disrupt U.S. brick-and-mortar competition by undercutting stateside discount food and beverage offerings from the likes of retail giant Walmart.
Aldi already has some 1,600 stores across the U.S., said Reuters, and prices that are 21 percent lower than its discount rivals.
The company plans to spend $1.6 billion on U.S. expansion and remodeling efforts. By the end of 2018, Aldi reportedly looks to remodel 1,300 U.S. stores and to open 400 new stores.
“We are re-merchandising, remodeling and 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,” Jason Hart, CEO of Aldi, told Reuters.
Hart, who noted that Aldi’s U.S. sales have doubled in the past five years, has also pledged that Aldi will change prices more frequently to respond to rivals if need be. Some 90 percent of Aldi’s products are private-label, which enables a greater pricing flexibility for the supermarket chain.
Walmart, of course, is working to defend its low-price title. Reuters expects Walmart to spend some $6 billion running price tests and urging vendors to undercut discount rivals by another 15 percent.
The worry among analysts is that the growing intensity of grocery’s discount games will only lead downward to more shuttered doors and bankruptcies. The retail grocery segment stateside has seen 18 companies go bankrupt since 2014.
“Given Aldi’s expansion, Lidl’s, entry, Wal-Mart’s response and Amazon’s growing ambitions in this space, it is fair to expect a significant acceleration in the bankruptcy and liquidation cycle in this sector over the next few years,” Burt Flickinger, managing director at retail consultancy Strategic Resource Group, told Reuters.
While Germany’s discount grocer Lidl also looks to expand into the U.S., planning to open as many as 100 locations across the East Coast by mid-2018, the company is changing up its discount model for American audiences.