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Discount grocery giants plan to lure back UK bargain-hunters

Cut-price grocers Lidl and Aldi, which only sell through brick-and-mortar stores, may have missed out on the boom in e-commerce during the pandemic, but are now planning to increase volumes as consumers go bargain hunting.
During the recent lockdown, a…

Cut-price grocers Lidl and Aldi, which only sell through brick-and-mortar stores, may have missed out on the boom in e-commerce during the pandemic, but are now planning to increase volumes as consumers go bargain hunting. During the recent lockdown, all supermarkets benefited from a switch in consumer spending from pubs and restaurants to in-home products; but traditional supermarkets, with their online-delivery offerings, benefitted most. The UK's Big Four - Tesco, Sainsbury, Asda and Morrison - beefed up online delivery massively, doubling online sales' share of the grocery market to 13% in the process.

During May, the Financial Times reports, Tesco saw sales grow at a faster rate than Aldi for the first time in ten years - although Lidl's sales have grown faster than both. Most observers, though, believe the migration to online grocery shopping is a permanent trend, which creates a challenge for discount retailers which are focused on in-store sales. In response, Aldi has started a click-and-collect service and has also teamed up with Deliveroo.

But these initiatives are not in the same league as the large-scale online delivery services offered by traditional supermarket rivals. Aldi says it is "listening closely to customer feedback" on both of its new services, but anything it decides to do online will have to be aligned with its "low-cost operating model". Despite the challenges, both Lidl and Aldi say they still plan to open more stores in the coming years, hoping to attract more consumers squeezed by the expected economic downturn.

Aldi plans to open a further 310 stores in the UK by 2025, giving it a total of 1,200; Lidl aims to open about 50 new stores each year. Rival supermarkets are conscious that price will be a key battleground over the coming months. Tesco has already promised to price-match Aldi on certain everyday products; Morrisons recently cut prices on 400 products, and Asda is also expected to reduce prices.

And, as both Aldi and Lidl aim to offer the lowest prices on the market, a(nother) price war with traditional UK supermarket rivals may be on the cards.

The FT reports that analysts calculate the price gap between discount stores and conventional supermarkets is now between 10 and 12%, compared with more than 20% a few years ago.

Sourced from Financial Times; additional content by WARC staff