Discount retailers vying for dominance in the marketplace - Competitive Discounts Vie for Dominance in Marketplace
Discount stores remain a go-to in Germany, but the competition is fierce amongst them. Market leaders Aldi and Lidl, in particular, have been slashing prices, heating up the competition. As per data from market research institute YouGov, reported by the German Press Agency, German discount stores generated a staggering 77 billion euros in turnover in 2024, a whopping 30% increase compared to five years ago.
Brands like Penny, Netto, and Norma have also shown robust growth compared to the overall market. The food retail sector has grown by an impressive 26.6% between 2019 and 2024 to reach about 203 billion euros. Supermarkets such as Edeka and Rewe have seen similar growth over the same period.
The corona pandemic and the Russian attack on Ukraine marked these years, but both Aldi and Lidl managed to gain market share during these challenging times. In 2024, discount stores controlled about 38% of the market, while full-range retailers accounted for roughly 29%. Self-service stores like Kaufland, Marktkauf, and Globus, along with specialized stores, experienced a decline in market share.
Intense rivalry in retail is evident in the intricate details: During the initial stages of the pandemic, supermarkets and consumer stores gained market share. However, this trend shifted towards discount stores in 2022 and 2023, as YouGov expert Robert Kecskes explains. Inflation was fueled by the war, causing a rapid surge in food prices.
However, this shift has recently come to a halt, and discount stores no longer automatically gain market share. Full-range retailers are beginning to catch up, increasing the competitive edge in the discount store sector. Kecskes adds that the competition between distribution channels is escalating, and the battle for market share amongst discount stores is becoming increasingly aggressive.
Aldi vs. Lidl: Who's the Unbeatable Discount King?
This competition is particularly noticeable between the two largest German discount stores, Aldi and Lidl. In a recent showdown, Lidl made headlines with its "historic price reduction," lowering the prices of over 500 items across various product groups by up to 35%. Details on which products are cheaper remain sketchy.
Aldi quickly countered with its own announcement, pledging to permanently reduce the prices of around 1,000 items by 2025, with hundreds more to follow shortly. Customers can expect bargains on dairy products, meat and sausage items, frozen food, sweets, and cleaning products, amongst other items. "Being the price leader isn't a short-term promotional tactic for us, but a fundamental principle," Aldi declared. Other retailers are jumping on the bandwagon as well.
Battle for the Budget-Friendly Crown
Prices are inflated: According to the Federal Statistical Office, food prices were 36.5% higher than the 2020 average in May. Handelsexpert Stephan Rüschen of the Baden-Württemberg Cooperative State University believes that these price reductions are here to stay. Retailers would risk losing credibility if they raised prices again soon, he explains.
Rüschen predicts that the price spiral is about more than just prices: "Lidl is aiming to gain market share and take over Aldi's price leadership." Price leadership refers to being perceived as the cheapest provider and setting prices. "Lidl is making a strong comeback and is closing the gap - and could potentially overtake Aldi Nord and Süd in terms of turnover," says Rüschen.
Kecskes agrees: "The price battles in discount stores are a strategic competition for price-conscious consumers." These price cuts do not apply to the entire range but are part of a strategic calculation: exceptional prices on some products are intended to lure new customers, who ideally also buy items with a higher profit margin.
In the end, it's the customers who benefit from this high-stakes competition, as they get to enjoy lower prices and the best deals. Whether Aldi or Lidl will emerge as the ultimate champion of budget shopping is yet to be seen, but one thing is certain - the race is heating up!
Key Players
- Aldi (Aldi Nord and Aldi Süd)
- Lidl
- Discount Stores
- Germany
- Robert Kecskes
- YouGov
- Inflation
- Consumer Behavior
- Retail Competition
- Market Share
- Price Wars
- EC countries, in light of the fierce price wars between Aldi and Lidl in Germany, could observe a significant impact on the free movement of goods as these discount stores strive to offer the lowest prices for a variety of products.
- As sports often encourage teamwork and the spirit of competition, the ongoing price wars between Aldi and Lidl can be compared to a challenging sports event, with each company aiming to provide the best services (quality products at lowest prices) to win over customers, thus demonstrating their supremacy in the market.
