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German grocery giant uses private labels, deep discounts to compete

The Aldi Group (Essen, Germany) is reportedly on an expansion program in the U.S. to open at least 75 stores this year, including its first store in New York City.

According to the Wall Street Journal, the German store chain – which is so cheap that Walmart couldn’t compete in Germany because shoppers found it too expensive -- is counting on the economic downturn to build its business here, which would mean American consumers would turn away from their traditional loyalty to name brands. At Aldi, 95 percent of the goods are the retailer’s own brands, whereas private label goods generally make up just about 22 percent of U.S. food sales.
 

Aldi first arrived in the U.S. in 1976 and now operates 1000 stores here, mostly in the Midwest and Northeast.

"This is the perfect confluence of factors for us," Jason Hart, president of Aldi's U.S. division, told the Journal. He said he is planning 25 new stores in the Dallas-Fort Worth area next year, plus a $40 million distribution center that will serve stores planned for Texas and Oklahoma, prime Walmart territory.
 

The Journal said that Aldi prices in the Midwest are between 15 and 20 percent less than Walmart and 30 to 40 percent cheaper than regional chains A Walmart spokeswoman told the Journal that Aldi's plans wouldn't affect its price strategy or operations.

In Germany, an estimated 90 percent of households shop at Aldi stores. But for its expansion in the U.S. and U.K., the retailer is opening up its 17,000-square-foot format with higher ceilings and more windows to make the space feel less cramped.