Aldi is cutting prices on more than 250 products, ranging from snacks to meals, and the move is putting even more pressure on an industry facing inflation. The discount grocer pegged year-over-year price increases at 7.7%, and further price cuts at Aldi could lead to intense competition for other companies.
Other grocers can still compete, though – while inflation has been high for the past year, the worst of it seems to be over, and everyone should be looking for ways to take advantage of summer trends while offering relief to their price-conscious customers.
“Every grocer at the moment will be under pressure to maintain their own margins whilst trying to compete with each other,” said Karen Green, grocery expert and author of Buyerology. “Off-price grocery can be a race to the bottom, so they all need to be focused on pulling the levers in their control. I expect most retailers were anticipating this move by Aldi so it won’t be a surprise.”
Green noted that Aldi is already a well-known discounter and that its latest move is “just a great way to reinforce that perception which indeed is a reality.” However, their position as a place for deals could open up opportunities for other grocers. Offering a differentiated selection that either beats Aldi on certain products or offers items Aldi doesn’t carry can provide reasons for Aldi fans to visit other stores.
“A lot of Aldi customers actually are promiscuous going from store to store to find the best prices so they may well be coming in for these deals and then going elsewhere for everything else,” said Green.
Green also provided several strategies for grocers to improve their cost position:
- Negotiating with suppliers for the best deals so that they flush out the commodity market price improvements
- Reducing their own cost base — taking out cost is key
- Taking advantage of commodity and currency fluctuations
- Removing the tail of products that have low margins/volumes that are taking up valuable shelf space
“Price is often a race to the bottom, and there are other ways to keep customers — better range, better service, nicer stores, and on a more macro level, the right location,” Green added.
There is no single path to overcoming Aldi’s slate of summer price cuts, but no grocer can afford to take this challenge sitting down. Companies need to evaluate where they can stand out from the competition and find ways to thrive as inflation hopefully begins to recede.
“Any grocer worth their salt will already be looking at the softening of prices in various commodity markets and thinking how they can build their own pricing strategy that can be used to help customers and use in their marketing campaigns,” Green added. “They will be creating their own offers that either match Aldi or create a point of difference by highlighting different options.”
