Experts say Aldi’s large assortment of private label, which accounts for
90% of its store products, gives the company greater speed and
flexibility in lowering prices than Wal-Mart. The world’s biggest
retailer primarily stocks national brands.
The escalating price war between the two chains will put significant
pressure on grocers throughout the industry, analysts said. “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.
Aldi is taking the fight to Wal-Mart, which isn’t something the world’s largest retailer is used to. In addition to its price maneuvering, Aldi is building its stores close to existing Wal-Mart locations — even right next door, in some cases — to lure customers away.
The discount chain also is undergoing an extensive $1.6 billion makeover, which the company hopes will have the dual effect of drawing in customers and driving down prices even further. “The remodels are aimed at increasing our volumes which means more purchasing power that will help us lower prices further,” Scott Patton, Aldi’s vice president of corporate buying, told Reuters.
Whoever wins, the real loser will likely be the rest of the industry,
which stands to see major pricing pressure stemming from this showdown.
Grocers, particularly conventional ones, are doing everything they can
to refresh their stores and deepen customer engagement, but a major
price war may be too much for some of them.
Source: Retail Dive