To win against Aldi and Lidl, supermarkets need to change their traditional approach to competing against hard discounters and embrace new strategies that leverage their strengths, according to Bill Bishop, chief architect of Brick Meets Click. Bishop presented this guidance at the 2019 NGA convention in San Diego. 

“Supermarkets must stop lowering their prices and eroding margins in response to hard discounters — it’s a price battle they just can’t win,” Bishop said.

The hard discounter business model allows those retailers to charge prices 30 to 40 percent below the regular price of branded products sold in supermarkets. When supermarkets lower their prices in response, they destroy their margins — and they still don’t win the “price battle.” It’s a losing strategy that is unsustainable, he said.

Bishop laid out a new and better strategy for grocers to consider that focuses on two things:

• Leveraging the store’s weekly specials, which often beat the prices offered by Aldi and Lidl.
• Identifying the specific products and prices that store’s individual shoppers actually care about — not overall price perception.

Price data collected by Circular Logic LLC showed that a supermarket’s weekly advertised prices are frequently lower than everyday prices offered by Aldi and/or Lidl. For example, based on one week in February 2019, a retailer in the Southeast had the price advantage for eight out of 11 (72 percent) of its front-page features based on comparable or same items.

The second step is to make this price advantage relevant to each shopper by personalizing the ad. Circular Logic helps retailers accomplish this key step by cross-matching data from the retailer’s loyalty program with its weekly promotions to identify the items that are most relevant to each household, and then sends a personalized email highlighting the 10 most relevant items to the shopper each week.