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Is Aldi a threat to Valley grocers? Probably not, says retail expert

Posted at 12:25 PM, Apr 19, 2018
and last updated 2018-04-19 15:25:40-04

In an already crowded grocery store landscape in the Valley, there's a newcomer. 

Germany-based Aldi is opening its first Arizona store in Buckeye near Yuma and Watson roads.

According to retail guru Bob Phibbs, the frugal concept is attractive to millennials.

"Low prices and the materials in boxes give the impression shoppers are getting the lowest prices," said Phibbs, CEO of The Retail Doctor and New York Retail Consultancy.

With Fry's, Bashas', Safeway, Natural Grocers, Walmart, Trader Joes, Whole Foods, WinCo. and more, Arizonans have a vast selection of grocery stores. Why would another store want to infiltrate an already-competitive market in an industry with tiny margins?

Related: 10 things to grocery shoppers may not know about Aldi
"They want to be the number three grocer in the U.S. and are on an aggressive expansion mode," said Phibbs. "With their new design, they're going after the 365 by Whole Foods concept and dollar stores that are growing exponentially, often with produce. Aldi goes into markets and creates a price war with bigger retailers including Walmart."

Phibbs said typically Aldi appeals to people from lower income neighborhoods to middle class. Some like the no-frills approach, but most believe low prices equate to low quality. And how about those full-service perks we're used to? Latte anyone?

"Traditional grocers learned long ago that adding a coffee shop like Starbucks or sushi bars where shoppers could see and consider built their average basket size. The longer they are in the store equals more money spent," he said.

But will more competition boost selection and lower prices? Phibbs points to online retailers like Walmart and Amazon which are delivering to doorsteps. 

"While Aldi will appeal to the frugal no-nonsense consumer and I expect fixed-income shoppers in the southwest, Amazon is delivering produce to your door, even delivering to your refrigerator in some markets. Convenience seems the way forward," Phibbs said. "The ones I expect Aldi to target are the Dollar Stores and underserved communities. And that has to be good for any community to have greater access."

The first Aldi store in Arizona is expected to open late this year or early next year.