business news in context, analysis with attitude

The Wall Street Journal this morning reports that Germany-based discount Aldi plans to spend $9 billion and "open nearly 900 stores and remodel hundreds more in the US ... over the next five years," which would give it a total of 2500 stores here.

Such an expansion would make it the third largest retailer in the US by store count, behind only Walmart and Kroger, and the plans come as Lidl - another german discounter - begins to open store sin the US, beginning with 10 on Thursday.

According to the Journal, "Executives at Wal-Mart and Kroger have been preparing for the growth of the discounters for years. Wal-Mart has been sprucing up its stores and slashing prices on some products in select markets, while Kroger continues to drive down costs to compete.

"But the discounters could have a big impact on the U.S. grocery market as they did in Europe. Their market share there has steadily grown while traditional supermarkets have seen theirs fall. Deep discount chains in the U.S. are expected to grow by up to 10% a year through 2020, five times the rate of traditional grocers, according to a recent report by consulting firm Bain & Co."

The move is seen as a major move by Aldi, which actually has been in the US since 1976, primarily with an appeal to low-income shoppers. But now these new stores - still with a focus on private label, but with an improved approach to fresh that management hopes will appeal to more affluent shoppers - are seen as a way to have a greater impact in the American market; it is seen as helpful that Americans' loyalty to major national brands seems to be eroding.
KC's View:
While I remain unconvinced that Aldi and Lidl can necessarily cause the kind of disruption that they have in the UK, where they've combined to erode the market shares enjoyed by the major and more traditional retailers, I do think they can cause a lot of margin trouble, affect consumer expectations, and have a real impact on stores that are less specific about their offerings and value propositions.

There is no room for error here - and no room for mediocrity, or just-good-enough retailing. None.