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Discount retailer Aldi has adjusted the pricing strategy for its domestic market: the current low fixed prices for certain products will be raised, so that promotions on A-brand products can be expanded.
Negative spiral
Both Aldi Nord and Aldi Süd have been issuing temporary discounts on A-brand products since the beginning of 2019, meaning quite a turnaround: the retailer traditionally always held to a strategy of fixed low prices, but that approach became less attractive as competitors presented ever more impressive promotions. The new strategy is mostly meant to challenge rival Lidl, which has been offering discounts on brand products for some time. Unfortunately, the result is a negative pricing spiral: both Lidl and Rewe responded in turn with more discounts, which leads to shrinking margins and decreasing revenue from the promotions.
In order to gain some leeway for price promotions, Aldi is now raising the fixed prices of a number of brand products to the level of the competition, according to Lebensmittel Zeitung. For example: the price for a box of Langnese Cremissimo ice cream (a Unilever brand) has been raised to 3.29 euros, but during promotions it will be between 1.85 and 1.99 euros. Whether the change of course is a wise move remains to be seen, but coverage in the German media has mostly emphasised that Aldi has now become more expensive.
Alarmed by the negative responses in the press and on social media, other Aldi branches – like the Belgian one – have clarified that this is a German-only initiative and that their pricing strategy continues unchanged.
