Wal-Mart will increasingly face the heat from its German rivals, Aldi and Lidl.
On Sunday, in a move that will most likely raise the stakes for its U.S. rivals in a price war, German grocery chain Aldi disclosed it would be investing $3.4 billion to expand its presence in the U.S. to 2,500 stores by 2022.
Currently the German grocery chain operates 1,600 stores in the U.S. It had earlier stated that it would be adding 400 more by the end of 2018 and sink in $1.6 billion to remodel 1,300 existing stores. The investment will raise Aldi’s capital expenditure to at least $5 billion so far.
Another German grocery chain Lidl, will be opening its first of 100 U.S. stores on June 2015. In May, the grocery store had said it’s the price points of its products will be less than 50% of its rivals.
Midst this onslaught, Wal-Mart Stores Inc, the world’s biggest retailer, is pushing vendors to undercut rivals by 15% in 11 U.S. states. Wal-Mart will most likely spend $6 billion to retain the title as the leader in the low-price band market, said analysts.
The ferocious expansion of Aldi and Lidl in the U.S. U.S. grocery market, which incidentally has seen 18 bankruptcies since 2014, could potentially overthrow Wal-Mart from its leadership position.
Earlier in May, Jason Hart, Aldi’s CEO had stated the company’s price points would be at least 21% lower than rivals.
“We’re growing at a time when other retailers are struggling,” said Hart in a statement while noting that the company’s prices are nearly 50% lower than its competition.
Aldi’s latest expansion plan will create 25,000 U.S. jobs and position it as the third-largest grocery chain in the United States, behind Wal-Mart and Kroger Co.
Aldi’s 2,500 stores would equal about 53% of Wal-Mart’s U.S. outlets.
“As we continue to expand and grow, our purchasing power continues to increase and allows us to bring products at better prices for consumers,” said Scott Patton, Aldi’s head of corporate buying.