How Aldi Plans To Beat Walmart’s Prices On Groceries

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For many of us, the most important thing about shopping for groceries isn’t the technology at the checkout line, or the number of artisanal ketchups available; it’s about getting a decent product for the best possible price. Aldi is hoping these pragmatic shoppers will help it win a price war with America’s largest supermarket chains, including Walmart.

One of Aldi’s main strategies to keep prices down is expanding its private-label goods, or in-house brands, CEO Jason Hart tells Reuters. These products cost Aldi less because they’re made specifically for the retailer, which also doesn’t have to spend any money marketing them to the public.

Along with the push for in-house brands, he says that the company is planning a massive expansion to put the heat on its established rivals.

“We are re-merchandising, remodeling, enhancing our product range, and are focused on gaining volume so more customers start their shopping at Aldi and we are able to complete their shopping lists moreso than we have in the past,” Hart said, adding that Aldi’s U.S. sales have doubled in five years.

The plan includes spending $1.6 billion to remodel 1,300 of its 1,600 U.S. stores, and open 400 new ones by the end of 2018. Hart says Aldi will have no qualms about changing prices frequently if that’s what’s needed to beat rivals.

Low prices are Aldi’s focus, Hart says. He claims that the company’s internal studies show its prices are 21% lower than its lowest-price rivals, which includes Walmart. That figure is calculated by tracking competition on a basket of groceries.

Reuters confirmed with four analysts and consultants that Aldi now has the lowest prices in private label consumer products in the states it operates. Walmart is nipping at Aldi’s heels in states where it’s conducting price tests to undercut Aldi, however.

While it varies by product, Aldi’s prices are lower than most of its rivals’ private label items and most branded items as well, the experts said.

It looks like Aldi is doing something right: Although it only has about a 1.5% share of the grocery market in the U.S., it’s growing by 15% a year, Reuters points outs, while Walmart has a 22% market share and is estimated to grow 2% this year.