A German grocery store that's invaded the US is a bigger threat to Walmart, Kroger, and Target than anyone thought
- German grocery chain Lidl is making a huge push into the US.
- The brand offers prices that are cheaper than Walmart's.
- Analysts at Jefferies are speculating that Target and Walmart are being forced to lower prices.
The German grocery chain Lidl is opening dozens of US stores - and it's already becoming a threat to major players in the space.
According to a recent note by equity research firm Jefferies, there's evidence that mass-market retailers like Target are now lowering prices to compete with Lidl, which has 10,000 global stores but just came to the US.
Target, Walmart, and Kroger all lowered prices the most in Charlotte, North Carolina, where there is a Lidl store.
"We find it interesting that the most aggressive declines were seen in Charlotte for both big box retailers; is this the Lidl effect?" the analysts wrote.
A recent price check on a basket of 20 items by Jefferies analysts found that Lidl was about 9% cheaper than Walmart, the largest grocer in the US. Lidl claims to offer products for as much as 50% less than rival stores.
So far, Lidl has opened 10 stores along the East Coast and plans to open 80 by the middle of next year.
Lidl keeps prices low by eschewing brand names.
About 90% of the products in Lidl stores are private-label brands. These are products manufactured specifically for Lidl.
Compared with big box, the chain's stores are relatively small and thinly staffed, which allows Lidl to pass savings on to customers. It also largely avoids traditional marketing.
Cheaper prices are incredibly important to customers, giving Lidl a huge advantage over rivals.
The rivalry between Kroger and Lidl has already been heating up. In June, a federal judge denied Kroger's request to force Lidl to stop selling items under its "Preferred Selection" brand.