Dive Brief:
- A recent online price comparison between eight popular Los Angeles grocery stores found Aldi was the cheapest, according to Brick Meets Click’s study. The German discounter's basket of goods was 4.5% less expensive than Walmart.
- Aldi also is piloting its online grocery service in Los Angeles, Atlanta and Dallas, The emergence of online grocery ordering options at extreme-value stores suggests this shift in shopping habits isn’t exclusive to upper-income households, the report found.
- The study from Brick Meets Click also found online grocery shopping is slowly chipping away at in-store trips because it’s easier to compare prices online, and because there are now more markets offering this service at a variety of price points.
Dive Insight:
For years, Walmart's star power has come from its low prices. Now that Aldi is offering groceries at an even greater discount, the retail powerhouse may have to reconsider its online strategy.
To its credit, Walmart has succeeded in keeping in-store prices low enough to maintain consumer loyalty, even when an Aldi moves in down the block. Plus, Walmart offers customers greater selection for a "stock up" trip than the European grocer.
Price is a powerful driving factor in both the online and brick-and-mortar grocery store. Aldi is able to keep its price point low by offering limited options, choosing smaller-sized store and focusing on its private label brands. This not only keeps products inexpensive, but also allows the retailer to quickly respond to changing consumer preferences.
Aldi's low prices don't undermine the quality of its product mix, however — especially when it comes to in-store brands. In 2017, the discount supermarket won more than 200 awards for its private label products. The retailer was recognized in a variety of categories, including parent-approved products, gluten-free options and its store brand wines.
Buying groceries on-line, and especially having them delivered to your home, has traditionally been viewed as skewing to higher-income shoppers, as it’s typically more expensive than shopping in the store. But now that Aldi is offering its extremely low prices online, it may give its customers an affordable entry to the luxury of skipping the grocery trip. In addition, Aldi may attract some higher-income consumers who are interested in its cheaper prices, but dislike the experience of shopping in its simpler store formats.
Aldi’s foray into online retail fits nicely within its larger transformation. The European grocer is expanding its line of organic produce and premium items in response to consumer demand, and perhaps also in an attempt to attract a broader range of customers. Offering online ordering is a logical next step in this direction.
Walmart and other traditional retailers are fighting back by slashing prices where they can to keep customers from leaving. Other retailers are increasing their private label brands, which consumers are increasingly interested in. So far it’s been a winning strategy for Aldi. Time will tell if it works for its competitors, too.