retail news in context, analysis with attitude

Bloomberg reports on a new Morgan Stanley study suggesting that German discount chain Aldi “was the choice of almost one in five shoppers who recently switched grocers … That’s more than Costco, Target, Kroger or Amazon-owned Whole Foods, highlighting Aldi’s growing appeal.”

While “Walmart and Kroger still dominate the $840 billion U.S. food retail sector, accounting for a combined one-third of the market, far above Aldi’s 2 percent,” Bloomberg notes that Aldi’s aggressive expansion plans in the US have “forced them to slash prices, compressing their already-thin profit margins.”

Aldi has said it plans to open 700 new US locations by 2022, which would bring its fleet total here to about 2,500. And, it is expanding its appeal by offering stronger selections in vegan and organic items, as well as by offering delivery in 35 states by this Thanksgiving.
KC's View:
I’ve been arguing here on MNB for some time that Aldi (and maybe even Lidl at some point) could represent the same kind of threat to US retailers that UK retailers have been facing for several years now.

In the UK, discounters’ market share is up at 11 percent, and they’ve forced Tesco to come up with its own discount format, called Jack’s, to blunt the impact. But in this case, even if Jack’s is a viable format, it probably is fair that in this case at least, Jack has been neither nimble nor quick.

Sure, the UK is different from the US … but that doesn’t mean that, over the long term, Aldi will be any less dangerous.

Here’ a statistic from the Bloomberg story that I had not seen before: “There’s an Aldi located within five miles of about half of all Walmart and Kroger stores.” Yikes.

Morgan Stanley analyst Simeon Gutman assesses the situation this way: “The war of attrition has begun.”

I’m not sure I’d disagree.