• by Sarah Mahoney , June 3, 2009

Look out, Walmart. Aldi, the rapidly growing limited-assortment food chain, says it can beat your low prices any day: The company just released a study showing that Aldi shoppers spend up to 26% less than those who shop at discounters like Walmart, and up to 37% less compared to those who shop at traditional supermarkets.

The study compares the cost of 184 items considered "very important to customers," ranging from apple juice to cheddar cheese to frozen chicken breasts, and reports that the Aldi basket averaged $315.29 -- about $127 less than the average $442.26 for the combination of discounters, big-box stores and traditional supermarkets. More than 18 million Americans are already convinced and shop at Aldi stores sprinkled over 30 states.

In terms of other limited-assortment stores, says Jon Hauptman, a consultant at Willard Bishop, based in Barrington, Ill., Aldi's rivals includes stores like Sav-A-Lot. "But their No. 1 competitor is Walmart -- they're both going after the same price-conscious shopper."

On one level, such stores are a tough sell: It's fairly easy to convince a shopper to try a store brand over a national brand in a retail environment she already knows well. But getting her to try an entirely new store -- and a different concept of a store than she has experienced before -- isn't easy. And to a degree, limited-assortment stores face the same type of consumer resistance that warehouse stores once did.

But once shoppers have "discovered" a new store, "it isn't easy to get them to switch, and I suspect many will continue to shop at these extreme-value stores once the economy improves," he says. "Shoppers are looking to stretch their grocery budgets, and they clearly get more bags of groceries at a store like Aldi. And increasingly, they are willing to trade brand and package size in favor of the absolute lowest price available," he says. "This recession has opened the eyes of many shoppers to limited-assortment stores as legitimate alternatives."

While food price increases are expected to moderate this year, according to the U.S. Department of Agriculture, shoppers are still trying to adjust to the 6.4% increase in 2008.

Supermarkets, which have seen their share of total retail food sales fall from 62.8% to 57.8% between 2001 and 2008, are finding novel ways to compete, he says. Some are varying their private-label strategy -- introducing second-tier "economy" lines, priced even lower than their store brands.

And some stores are becoming increasingly strategic in promoting private-label brands. Publix, for example, is in the midst of its "Brand Challenge," which it offers several weeks a year, giving consumers up to three free private-label products.

"We've built a reputation for quality private-label products that can save shoppers between 10 and 30% off national brands," says a spokesperson. "Since our store brands are continually evolving, the challenge concept, which we promote in circulars, in-store, and on our Web site, is appealing to new consumers."