Lidl Pressures Competitors to Drop Prices

According to a new study released by the University of North Carolina at Chapel Hill (UNC), Lidl is driving competitors to drop prices of key products by 55% than what they usually charge in other markets where Lidl is not around.

The study was led by marketing professor Katrijn Gielen at the University of North Carolina Kenan-Flagler Business School and was commissioned by Lidl US.

The study examines the competitive price effect that Lidl’s entrance into the U.S. market caused, as well as the reaction of other supermarkets such as Aldi, Food Lion, Kroger, Publix and Walmart. Gielen’s report states that the competitive pressure was three times greater than when Walmart first entered a new market.

Gielens analyzed prices in six markets where Lidl operates and six markets where Lidl is not present in Virginia, North Carolina and South Carolina. She also looked at prices from 48 grocery products, including dairy, meats, produce, and canned and frozen goods, which were collected through store visits.

Data shows that retailers set prices 25 percent above Lidl prices, with more to be paid at Kroger and Publix. Prices are about 100 percent higher at Publix, 50 percent higher at Kroger, 36 percent higher at Food Lion, 9 percent higher at Walmart, and 5 percent higher at Aldi.

Lidl seeks to be 50% cheaper than its competitors in the United States

Prices are lower in supermarkets where Lidl is nearby

However, the study found that when Lidl entered the market, supermarkets changed their prices. It was found that price reductions of more than 30 percent could be found in categories such as avocados and bread-related products. For ice cream, bananas and cheese, the price reductions were more than 15 percent.

The study also found that consumers saved more in markets where Lidl is present. For example, people shopping at Kroger save up to $22 in markets where Lidl operates compared to markets where Lidl is not present due to the cutting of prices. Consumers also save up to $17 at Food Lion and $14 at Aldi in comparison to markets where Lidl is not located.

Acccording to UNC, Gielens said, “We know that supermarket chains systematically compete with each other on price. The level of competitive pressure Lidl is exerting on leading retailers to drop their prices in these markets is unprecedented.”