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Why Aldi and its Thousands of Planned US Stores Will be a Threat to Discount Retailers

Bucking the great retail purge that has seen thousands of stores closed this year alone, Aldi is moving into the U.S. in a big way.

The German discount grocery chain said Monday that it would invest $3.4 billion to expand its U.S. footprint to 2,500 stores by the end of 2022. Aldi currently has more than 1,600 stores across 35 states after its first foray into the United States in 1976 with a store in Iowa. If it reaches that 2,500 store goal—which is also expected to add 25,000 domestic jobs—Aldi would be the third largest grocery store (by store count) in the U.S.

“We pioneered a grocery model built around value, convenience, quality and selection and now ALDI is one of America’s favorite and fastest growing retailers,” said CEO Jason Hart. “We’re growing at a time when other retailers are struggling. We are giving our customers what they want, which is more organic produce, antibiotic-free meats and fresh healthier options across the store, all at unmatched prices up to 50 percent lower than traditional grocery stores.”

Aldi has evolved from its grocery-only model over the years to offering on-trend apparel and home goods, among other basic necessities, and it’s even trying to go more sustainable with the products it does have. In March of 2016, the company launched its first collection of Fairtrade cotton T-shirts, which were priced between $6 and $8, but only sold for a limited time.

(Read More about Aldi’s latest eco efforts: VF, Aldi and Downlite Focus on Eco Forests, Feathers and Factories)

The store has capitalized on the discount model and captured that market largely because 90 percent of what it sells in the store is an Aldi-exclusive brand, which means it doesn’t have to foot the bill for the marketing and advertising that comes with national brands. Aldi also maintains fewer store employees, leaving customers to bring their own bags, bag their own groceries and pay a $0.25 deposit for a shopping cart, encouraging their return so that employees don’t have to be designated to corral carts. Product is also displayed in its designed shipping box to help Aldi cut time and resources when it comes to stocking shelves.

“Aldi is growing into an increasingly considerable threat to American grocery staples like Walmart, Kroger and Whole Foods, among other national and regional grocery store chains,” noted an article last month in Zacks Investment Research, which called Aldi the ‘grocery store of the future.’ “Walmart even reportedly tested a ‘price-comparison test’ in nearly 1,200 of its U.S. stores in the hopes of closing the price gap between itself and its competitors, including Aldi.”

Aldi’s German rival Lidl could also give Walmart some run for its market share. The company said in December that it was scoping locations for its U.S. entry and now the first of its American stores are slated to open Thursday.

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Lidl said 20 stores will open in Virginia, North Carolina and South Caroline this summer, and by next summer the company plans to open as many as 100 stores across the East Coast. Like Aldi, apparel is on the menu at Lidl as well. The grocer recently announced a collaboration with supermodel Heidi Klum, which will debut later this year.

But for now, Aldi seems to be going full steam ahead in a retail market where things have largely been quite the opposite.

“Aldi’s discount model appears to be the way of the future,” according to Zacks. “More and more customers are looking to pay less for grocery and household items, and with the demand for high quality and freshness on the rise, Aldi is creatively merging the two to create a cheap and unique shopping experience.”