After entering the intense price war last month, Wal-Mart Stores Inc (NYSE:WMT) could be increasingly taking an advantage over its rival German Grocer Lidl. According to S.C. Jefferies analyst Daniel Binder, Lidl is losing the price advantage over Walmart Stores and ALDI after launching its first 20 US stores in Virginia, North and South Carolina regions.
The Lidl initial prices in South Carolina were at same level with Walmart and ALDI at the beginning, but later Walmart and ALDI reduced its prices and as Binder states, Lidl has not done the same. Consumers are enjoying major discounts at both Wal-Mart and ALDI, which cannot be found at Lidl stores, such as a 29-cent discount on a carton of a dozen eggs and much more. Furthermore, the prices of certain items on nationally branded items at Lidl are costlier than the offers at its rivals.
Last month, the Germany-based ALDI announced its interest to invest about $3.4 billion in the U.S. to expand its presence in the region by opening more than 2,500 grocery stores by 2022. The intended plan will make ALDI come third after Walmart and Kroger stores.
Additionally, Lidl which is also a German-based store disclosed its plans to launch its expansion in the US. Lidl was expected to put pressure on Walmart as it also distributes general merchandise just as Walmart and ALDI.
The expansions were supposed to threaten the leading US Company, Walmart, particularly in the grocery segment and the move has led to price wars among the rivals as consumers increasingly enjoy the discounted prices of items.
Competing on price is significant for Wal-Mart which could maintain its leading position in the market as its discounted grocery segment is anticipated to increase every year for the next three years. Based on Bain & Co findings, by end of the year, Wal-Mart will be trailing lower prices in numerous regions with the intention of offering 15% prices than its rivals.
When Lidl opened its first store in mid-June, the German-based grocery was expected to aggressively beat Wal-Mart on prices but things have taken a different curve as Wal-mart counteracts with lower prices.