Discounters in the US

PROSPECTS

Discounters’ meteoric rise in the US continues

In 2018, the phenomenal run that discounters experienced in the US over the review period showed no signs of abating. Although the channel started from a relatively low base, its value sales posted substantially higher yearly growth than any other grocery retailer.

Discounters strongly embraces omnichannel retailing

As proponents of a deep discounting model designed to appeal first and foremost to the most price-conscious consumers, discounters earned a reputation for being somewhat more insulated from the threat posed by internet retailing than most other grocery retailers. However, in 2018, US discounter brands began to take solid steps to address the looming e-commerce threat by assertively rolling out their own omnichannel retail strategies.

Discounters expands selection of organic and natural grocery products

Healthy eating trends have had a significant impact on US consumer preferences over the review period, and as a growing proportion of the populace gravitates towards food marketed as fresh, natural, or organic, high-end supermarket chains – such as Whole Foods and Sprouts Farmers Market – have emerged in a bid to cater to these consumers’ demands. On the other hand, discounters such as Aldi and Lidl have historically made their names more through offering deep discounts on groceries, with an emphasis on steering consumers towards their extensive and very competitively-priced private label offerings.

COMPETITIVE LANDSCAPE

Aldi strengthens leadership of discounters

Despite the entry of global competitor Lidl (a Schwarz Beteiligungs GmbH brand) to the US, Aldi continued to gain value share in discounters, remaining the dominant player. One of the principal reasons for its success is its commitment to pursuing an aggressive expansion plan in the US, with the chain gaining several positions in overall store-based retailing for its outlet growth in 2018.

Lidl reconsiders its US strategy

One of the biggest stories in grocery retailing in 2017 was the arrival of discounter chain Lidl to the US. Lidl already commands the highest value share of discounters in Western Europe, and as it began to open outlets in the Mid-Atlantic and Southern states in June 2017, many industry analysts predicted that it would soon pose a serious threat not only to Aldi, but also to other leading grocery players, such as Walmart Inc and Kroger Co.

Save-A-Lot struggles to compete

While discounters, and Aldi in particular, performs strongly in the US, other brands struggled. Save-a-Lot Food Stores, for example, ranked second behind Aldi both in terms of value sales and outlets.

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