Aldi’s and Lidl’s surge could be ending – analysts

By Nicholas Robinson

- Last updated on GMT

The big four are hitting back the discounters more fiercely
The big four are hitting back the discounters more fiercely

Related tags Wal-mart Tesco

The upsurge of the discounters may finally be over as the “imploding” big four take decisive action to tackle them, leading city analysts have claimed.

Morrisons may have discovered discounters Aldi’s and Lidl’s 'kryptonite' with the announcement of its price match points system ‘Match & More’ yesterday (October 2), according to Shore Capital analysts Clive Black and Darren Shirley.

“The free lunch that the limited assortment discounters (LADs), Aldi and Lidl, have had in recent years in the UK is coming to an end, in our view, as imploding superstore groups finally react,” ​they said.

“The end of the cheap feeding extravaganza for the LADs is long overdue, commencing as it did in 2013 with Asda simplifying its offer and cutting prices.”

Troubled retailer

Troubled retailer Morrisons had “turned up the heat” ​another notch after announcing its points system​ yesterday, they said. 

The new card-based scheme would give Morrisons’ customers points on products, which can be redeemed for vouchers, if they could be found cheaper at another of the big four or the discounters.

Although the new system was Morrisons’ latest attempt to take on the discounters, Black and Shirley still questioned the virtues of points cards and loyalty schemes.

“We can imagine Aldi and Lidl playing much mischief with Match & More, not least because it may be reminding customers each week how much more expensive Morrisons is, a failure of Tesco’s ‘Price Promise’,” ​they said.

Furthermore, Black and Shirley challenged why Morrisons had not tried to extoll its available resources into a more democratic process that looked after all of its customers in the same way, instead of driving down prices.

Could not compete

The discounters could not compete with Morrisons’ product range, counters and services, they pointed out.

Loyalty cards were also a thing of the 1990s as loyalty meant nothing to savvy consumers anymore, who were more concerned with finding a bargain, they added.

“We have to say that we struggle with the concept; that said it will be the customers that will ultimately prove us right or wrong,” ​said Black and Shirley.

More to the point, neither Aldi nor Lidl had points systems or loyalty programmes and yet continued to outperform Morrisons – “they just have the most simple offer possible”, ​they added.

Meanwhile, Morrisons revealed half-year profits down​ by more than 30% last month, as a result of sharper competition from the discounters.

Its pre-tax profits also fell to £239M in the six months to August 3, compared to £344M for the same period last year.

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4 comments

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A place for everyone

Posted by Tim S,

The reality is, the big retailers don't have this market to themselves anymore. Like they took over from the local greengrocer/ butcher/ baker, so the discounters have provided an alternative.

It is no longer just a question of cheaper prices (Aldi/ Lidl do tend to be cheaper on many items), most household's are looking for something more than the big retailers offer.

I think they days of store loyalty have gone to a large extent and many of us will continue to shop at multiple retail outlets, to do our weekly shopping.

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Discounter difference plus?

Posted by Kevin Clarke,

Of course Daltons swipe at Aldi/Lidl is a smart move if customers 'get it' and more importantly trust Morrison's to watch the marketplace and keep making sure customers benefit? will Morrison's keep the pressure up long term? it will be expensive for sure and the clever chaps at Aldi/Lidl could make life very uncomfortable with special offers here and there.

And what of competing for customer traffic with the discounters by making a big play of all the things that you can't get in Aldi/Lidl etc?

Question is where is the battle ground heading? are more affluent times ahead and even if they are will customers ease up and mix shop? Waitrose for special stuff and Aldi for bargains?

as Greg Wallace would say, 'Food retailing has never been tougher than this' but should that be more interesting than this??

Good to see initiatives playing a part, more innovation set to come for sure, 25 years ago in the States you could buy a coffee/cake and relax in a grocery store as you shopped (not only in a separate cafe') you could chat to staff and be relaxed and yet today in the UK you don't see that? these and other ideas would be near impossible in Aldi/Lidl/ come on Tesco and the other big boys, make it more fun to shop, see the throng of people at food bars in Harrods etc

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Quality at ALDI

Posted by Harry on The Hill,

I agree with most of the remarks made by Ramara; the jams and others preserves at ALDI are simply superb and better than ANYTHING I can find in the big four! Some of their products are not quite as good, like 'Weet Bix' type cereals and we don't like the chocolate but otherwise in the main items are as good or better. I am convinced that they do this by keeping their fixed costs in control. Also as a farmer I have had experience of dealing with Tesco and it was NOT a happy experience; rather like dealing with a bully at school! Waitrose and to a lesser extent Sainsbury's were far more civilised and flexible. I go to ALDI first and then Sainsbury's or possibly Morrisons to buy what they do not stock.

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