entering for the first time. But he also predicts it could be
a messy reordering.
“Someone’s not going to make it,” Thompson tells Gro-
cery Business. “But people will also realize just how hard
it is to get American consumers to change their everyday
shopping patterns. That’s a very difficult thing to do.”
Existing competitors in the path of the discounters
such as Food Lion and Wal-Mart Stores have made
enormous investments in recent years that together look
something like a playbook to combat hard discounters.
Both have made multimillion-dollar investments in
lower everyday prices and improved freshness and ser-
vice in stores, and both are emphasizing private label and
convenience. While profits have slowed, their respective
sales have thus far held up.
Dick Boer, CEO of Food Lion parent Ahold Delhaize,
said in a recent earnings call that in addition to the mar-ketwide “easy, fresh and affordable” rebrandings—an initiative the company has spent more than $600 million on
since 2014—Food Lion stores in direct competition with a
nearby Lidl were taking down prices on around 300 items
per store to match the new competitor.
Though Boer declined to comment on the size of the
discounts taken, Will Harwood, a spokesman for Lidl,
says that retailers in the immediate vicinity of Lidl’s new
stores have reacted to its arrival by slashing prices by as
much as 30%.
Walmart has likewise undergone considerable new
investment in the U. S. since 2015—including an initiative
to raise hourly rates for workers, which speaks to another
cost advantage of hard discounters. Their smaller, simpler stores and limited operating hours allow for fewer
employees covering more areas of their stores—and as a
result, they tend to be paid relatively higher hourly wages.
It’s not a coincidence, Bolton points out, that both
Ahold Delhaize and Walmart gained experience dealing
with the same expansion of hard discounters in Europe. In
the United Kingdom, Bolton says, Aldi and Lidl boosted
their combined share of the market from 5% to 13% of
sales over eight years.
Too many U. S. retailers are still overlooking the threat,
Bolton says, and they’re the ones who will pay. Many, he
says, would be surprised to see the degree to which Aldi
has evolved its offering and its appeal to a wider range of
shoppers, finding room on its limited shelves for trend-right offerings such as gluten-free, better wines and
cheeses, and expansions largely designed to accommodate bigger selections of refrigerated produce. Lidl stores
are similarly fresh-forward, featuring a fresh bakery
accompanying produce at every store entrance.
“One independent retailer I spoke to had an Aldi down
the street, but hadn’t been there in four years,” Bolton
says. “Their attitude was, ‘They don’t compete for the
same customers as me’; but they didn’t realize their milk
was $3 a gallon and it was $1.17 at Aldi, and
that Aldi was going after their shoppers with
wine and cheese.”
Squaring with the
Beast of the Jungle
The $13.6 billion pairing of Amazon and
Whole Foods Markets announced in June and
completed in September fused the world’s
largest online merchant with the innovative
but struggling brick-and-mortar natural foods
retailer. Their profiles were such that a round
of price investment announced on key items
concurrent with the deal’s completion resulted
in a meaningful jolt in foot traffic to Whole
Foods stores, but industry observers say it will
take more than a few price investments to get
Whole Foods back into shape. Indeed, competitors reporting financial results over that
period, including Sprouts Farmers Markets
and Ahold Delhaize, have each said the price
investments didn’t have a meaningful impact
on their results, because the action only managed to get Whole Foods prices from a wide
gap with them to a somewhat narrower one.
replace Whole Foods’