Aldi is changing the US Supermarket Landscape

Aldi is changing the US Supermarket Landscape

Indu Perepu

Germany-based hard discount retailer Aldi has been operating in the US since 1976. Following its strategy in other markets, in the US too, Aldi’s stores were smaller compared to the other retailers; located on the outskirts where the rents were low; 90% of the items stocked were private label; assortment of products was limited; were manned by two or three staff; plastic and paper bags for were to be purchased; trolley had to be rented and the shoppers had to bag their purchases themselves. Aldi stocked only 1,400 items as against 40,000 available at other supermarkets and 100,000 in Walmart Supercenters.

Aldi’s practices were not instantly liked by the US customers, who were used to a large assortment of products and customer service. It took Aldi more than two decades to grow to 500 stores. After 30 years of presence in the US, Aldi could capture just 1.5% of the market. However, the US recession in the 2008 made the customers budget-conscious and many of them turned to Aldi, increasing its presence and popularity.

In 2017, Lidl, Aldi’s competitor in its home country announced its entry into the US. Aldi upped its antennae and announced investment of US$ 3.4 billion, remodeling 1,300 of its existing stores by 2020, and expanding to 2,500 stores nationwide by the end of 2022. Lidl also started expanding rapidly.

The competition between these hard discounters had an impact on the larger retailers like Walmart and Kroger. These retailers also started increasing the assortment of private label products, and reduced prices. But still Aldi’s patronage continued to grow. According to Morgan Stanley, one in five customers who switched grocery stores opted for Aldi. Aldi also upped its online presence and partnered with Instacart, which operated grocery delivery service across the US.

Aldi is on its way to becoming the third largest supermarket chain by 2025, behind Walmart and Kroger. And as the CEO of Walmart in the US, Greg Foran put it, Aldi is all set to reshape the US grocery retail industry along the way.

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