When the German grocer Lidl enters a new market, other grocery stores respond by lowering prices to stay competitive, according to a study from UNC-Chapel Hill released Wednesday.
The low-priced grocer made a splash this summer when it first entered the U.S. with stores in the Carolinas and Virginia. Experts have said its effect could be as significant as Amazon’s is on other retailers. According to the UNC study, competing grocers near Lidl stores set their prices 9.3 percent lower on average than in markets where Lidl is not present.
The report, commissioned by Lidl, was conducted independently by UNC’s Kenan-Flagler Business School, and researchers had full discretion of the study without Lidl’s input, according to Katrijn Gielens, an associate professor of marketing at UNC who led the study.
Still, the findings skewed favorably for Lidl over competitors, including Aldi, Food Lion, Walmart, Publix and Kroger, which owns Matthews-based Harris Teeter.
“Without a doubt, (Lidl is) putting extra pressure on retail prices,” Gielens said in a call with reporters Wednesday.
The study examined 48 commonly purchased private label products from a variety of categories, including dairy products, meats, produce, canned food and frozen goods. It examined Lidl stores and competitors in six markets in the Carolinas and Virginia. The nearest to Charlotte was Shelby.
The study found that supermarkets in proximity to Lidl stores set their grocery prices up to 55 percent cheaper compared with stores in markets without Lidls. (Competing stores were within a 1.7-mile radius of the nearest Lidl, according to the study.)
“The University of North Carolina study validates what we have seen on the ground in every market since launching our stores,” Lidl spokesman Will Harwood said in an email.
As Lidl continues to expand throughout the U.S., other grocers will continue to slash prices, according to the study.
“It is not yet clear who the retail winners will be as the grocery price wars evolve, but there is little doubt that consumers will benefit as retailers are forced to continue dropping prices and offer more convenient shopping services in order to stay competitive,” the study stated.
This summer, the Observer conducted an analysis of the lowest prices of five staple items – a dozen large eggs, a gallon of skim milk, a loaf of white bread, ketchup and 1 pound of lean ground beef – at nine Charlotte grocery stores. We found that Aldi had the cheapest total: $7.69. At Lidl, which expanded here after the analysis, that same list of items was $6.29.
The UNC study revealed that consumers experience significant cost-savings when shopping in areas where Lidl has already expanded. Here are some additional results about cost-saving in Lidl markets:
▪ Aldi lowered prices by an average of 13.9 percent (savings of $14).
▪ Food Lion lowered prices by an average of 13.6 percent (savings of $17).
▪ Kroger lowered prices by an average of 10.1 percent (savings of $22).
▪ Publix lowered prices by an average of 3.9 percent (savings of $7).
▪ Walmart lowered prices by an average of 2.5 percent (savings of $3).