America's newest grocery store chain has an advantage that should terrify Walmart (WMT)

pulse

June 19, 2017 4:28 PM

Lidl is about 9% cheaper than Walmart, according to a price check on a basket of 20 items by Jefferies analysts.

Lidl is firing back against Kroger's claims that the German supermarket chain is guilty of copyright infringement.

The German supermarket chain Lidl just opened its first US stores last week, and it's already dominating America's largest grocer, Walmart, on prices.

The price check also revealed that Lidl was 3% cheaper than its German rival Aldi and 16% cheaper than Food Lion.

This new competition is likely to put added pressure on US grocers to lower their prices at a time when food deflation is already weighing down margins.

In addition to low prices, the Lidl store also offered a premium shopping experience with impressive customer service and an attractive store design that seemed to come straight from US shoppers' most beloved grocery chains like Publix and Costco, according to the Jefferies analysts.

"The retailer seemed to steal certain aspects from various retailers, such as hints of Publix (employees were extremely friendly and even escorted the elderly around in wheelchairs), Costco (random sample stations, concrete floors, display cases on pallets and still in shipping packaging), and insert any specialty grocer name here (wood grain decor, vibrant signage, and a respectable bakery/ethnic/organic offering)," they wrote.

Lidl has more than 10,000 stores worldwide and plans to open 100 in the US by next summer. Its entrance into the US market will cause disruption for years to come, according to Jefferies.

"Our findings show not just aggressive discounts, but also a far more favorable shop vs. its German peer Aldi," the analysts wrote. "Given the results, Lidl's plans for 100 units by summer 2018, continued Aldi expansion, and what reactions we have already seen from competition, the hard discounter threat is real and could prove highly disruptive over the next several years."

Here's the list of items analysts checked at the Walmart, Lidl, Aldi, and Food Lion stores in Winston-Salem, North Carolina:

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