O'FALLON, Mo. — Seeking to boost traffic among a shopper base troubled by rising food prices, Aldi has launched a first-of-its-kind program to lower its everyday prices on more than 100 of its top-selling items at 60 stores serviced by its O'Fallon division here.
The nine-week pilot program, which kicked off Feb. 10, may eventually be replicated in additional markets, an Aldi official told SN.
“With inflation strong and a lot of prices going up in the grocery industry, we feel the timing is impeccable to do something like this,” Paul Piorkowski, vice president of Aldi's O'Fallon division, which includes 38 stores in metro St. Louis, told SN in an interview. Aldi, the German retailer with U.S. headquarters in Batavia, Ill., operates nearly 900 food stores in 27 states.
Observers said the price reductions — which Aldi said would range from 12% to 27% on many of its top-selling items — provide the discounter with an opportunity to capture and convert conventional shoppers “trading down” while the U.S. economy slows. The new low prices also better serve a core constituency that has been particularly sensitive to recent food and energy cost inflation, as well as mortgage rate hikes, that some believe has the U.S. economy flirting with recession.
“I don't know if you want to say we're in a recession, but we're certainly facing tougher times economically, and it will cause customers to rethink how they're spending their money,” Neil Stern, a senior partner for McMillan Doolittle, Chicago, told SN last week. “That creates an opportunity for Aldi to get people who previously may not have wanted to try it, to try it.”
Aldi said the price reduction program is the first of its kind in the U.S. An everyday-low-price operator that relies mainly on private-label items and already has low-price leadership in its markets, Aldi intends to make its price cuts permanent, Piorkowski said.
Reductions in the first week of the program included 32-ounce elbow macaroni reduced to $1.09 from $1.29; and instant mashed potatoes going from $1.09 a package to 99 cents. Competitors' prices for the same items range from $1.50 to $2.59, and $1.13 to $1.67, respectively, Aldi said.
“We are purposely picking the items that are fast movers, because we feel the customers will pick up on that. We're hoping to get a good boost in store traffic,” Piorkowski said. “We want to pay for this by increasing our foot traffic in the stores.”
Piorkowski said Aldi chose the St. Louis market to debut the price cuts “mainly because we feel we have a really good customer base that are really going to appreciate the retail reductions.” Additionally, he said, the quality of competition in St. Louis, where Aldi has operated for more than a decade, provides it with a solid testing ground.
“We feel like if it can work here, it can work everywhere,” he said.
The leading conventional supermarket chain in St. Louis, Schnuck Markets, lowered prices on around 10,000 items a year ago.
Last week, Schnuck's weekly circular promoted a slate of 10-for-$10 items, including everyday low “Price Breaker” items. The circular for Shop 'n Save, the 41-store regional chain owned by Supervalu, Minneapolis, advertised “Total value that's never changed,” including 12,000 “red tag” reductions.