If it seems that your groceries have started becoming less expensive, you may have Lidl to thank – even if you don’t shop there.
The German import, a small-format competitor to ALDI, opened its first American store in 2017 and now has more than 100 stores along the East Coast from Georgia to New York. It was in recognition of its recent store openings in New York that the retailer commissioned a study – the second of its kind – showing that Lidl’s prices are so low, they make prices lower for everyone.
The University of North Carolina study released this month focused on Lidl’s store openings late last year on Long Island, New York. The study compared prices at Lidl locations and at local competitors, and found that “all retailers decreased their prices considerably after Lidl opened new stores.” Target and Trader Joe’s lowered their prices by an average of 4%, Costco by 8%, Walmart by 9% and ALDI by 15%, all apparently to ensure they wouldn’t be undercut by Lidl.
But Lidl eventually won the price war, the study concluded. By March 2020, just before the coronavirus pandemic threw a wrench into the grocery business, “Lidl prices were substantially lower when compared to competing retailers across Long Island,” despite the competitors’ price cuts. A price comparison showed that Costco, ALDI and Walmart prices were about equal to Lidl’s, while Target’s prices were 18.5% higher, and comparable products at Trader Joe’s were a whopping 44.9% higher.
The pandemic, of course, has drastically changed our grocery shopping behaviors, affecting supplies, causing prices to rise and promotions to dwindle. Even so, Lidl says the study proves it’s the best choice in these troubled times. “The findings show Lidl’s price-cutting effect is erasing the steepest increase in food prices seen by consumers in decades,” the retailer said after the study’s release.
The study is similar to one conducted in early 2018, months after Lidl opened its first U.S. stores, most of them in Virginia, North Carolina and South Carolina. “On average, competing retailers near Lidl stores set their prices approximately 9.3% lower than in markets where Lidl is not present,” that report found. “This price reaction results, on average, in substantial dollar savings for customers.”
So if Lidl is so successful at lowering prices – not only in its own stores, but at its competitors’ stores as well – why aren’t there Lidls everyone and why isn’t everyone shopping there?
Retail analysts have called the Lidl effect something of a double-edged sword. A business magazine in Lidl’s home country of Germany once noted that competitors lowering their prices in anticipation of Lidl’s arrival may have given Lidl bragging rights, but it also had the effect of blunting Lidl’s impact. If Lidl made everyone else’s prices lower, then why bother going to Lidl at all? That’s what many shoppers apparently thought, the magazine reported, as “curious customers came in” when the stores opened, “but the euphoria did not last long; Walmart and ALDI managed to get the clientele back.”
A followup report by Catalina found that “Lidl had a significant effect on competing supermarkets during the first two months after its openings,” but “that impact declined precipitously by the third month as many trial Lidl shoppers returned to their past shopping behavior.”
And last year, the grocery consulting firm Brick Meets Click found that competitors often beat Lidl on price when you take promotions and coupons into account. Lidl doesn’t accept manufacturer’s coupons. And while Lidl does put out a weekly ad, Brick Meets Click found that competitors’ advertised discounts are often lower than Lidl’s. During one week in February 2019, the firm compared a southeastern grocery chain’s advertised prices with Lidl’s, and found that 8 of 11 items on the front page alone of the grocer’s weekly ad were priced lower than the same items at Lidl.
As savvy shoppers well know, buying something on sale at a traditional grocery store can often save you a lot more than buying something at its “everyday low price” at a store like Walmart, ALDI or Lidl. That’s why the Catalina study advised Lidl competitors not to just lower prices across the board in an attempt to undercut Lidl, but to offer deeper discounts and more promotions in specific categories where Lidl seems to do well.
That said, there are some shoppers who aren’t interested in hunting for deals and would rather just shop somewhere they know will offer consistently low prices. And Lidl says that’s where it comes in – especially now.
“Lidl’s competitive price-cutting effect is continuing to pressure other retailers to drop their prices,” study author Katrijn Gielens said in a statement. “Given that U.S. households are facing the fastest-rising rise in food prices in a generation and a looming recession, understanding how supermarket competition can keep grocery prices at bay is more important than ever.”
And considering coupons and promotions haven’t been as good as they used to be, Lidl may be onto something. All of this comes as the retailer plans to continue opening stores and introducing itself to new markets – a new store in Burlington, New Jersey opens today, and there are four more openings planned in the next few weeks. So if you have a Lidl near you, you may be saving more money on your groceries, whether you shop there or not. And if Lidl hasn’t made it to your area yet – at the rate the retailer hopes to expand, it could be just a matter of time.
Image source: Lidl
