Aldi and Costco have very different business models.
While Costco’s model centers on memberships and annual fees, Aldi’s model is far more casual. Customers can come in on a whim, stock up on low-cost goods, and not have to worry about whether they’re getting their money’s worth on a membership.
But if there’s one thing Aldi and Costco have in common, it’s a commitment to low prices.
Now, Aldi is making a big move to attract budget-conscious grocery shoppers.
And its latest investment in lower prices could put additional pressure on Costco’s value-focused business model.
Aldi is betting on lower prices to attract shoppers
Aldi recently announced that it’s investing an estimated $86 million in additional savings on seasonal groceries and other products this fall.
The price reductions, which are scheduled to last through at least Nov. 3, build on Aldi’s everyday low-price strategy.
According to Aldi, nearly one-third of its everyday in-store assortment is now priced lower than it was a year ago.
The retailer is cutting prices on fresh produce, organic products, and proteins, including popular seasonal items.
The move comes as grocery shoppers continue looking for ways to stretch their budgets, creating an opportunity for retailers that can demonstrate tangible savings on everyday essentials.
In September, grocery prices were up 1.8% on an annual basis, according to the Consumer Price Index.
Lower prices could also help Aldi capture more grocery spending from Costco members who are willing to trade the warehouse club’s bulk-buying format for less expensive shopping trips.
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Aldi is focused on perpetual value
Aldi’s strategy has long centered on keeping grocery bills low through a streamlined business model and a relatively limited product assortment.
The company’s latest price investments reinforce that approach by lowering costs on items consumers regularly purchase.
“At Aldi, value is a year-round promise, not a promotion,” said Scott Patton, Aldi’s chief commercial officer, in the company’s announcement.
“Customers trust us to help them make the most of their grocery budget, and we never stop looking for ways to run our business more efficiently so we can pass along savings.”
The retailer estimates that its pricing strategy saves shoppers $10.2 billion.
Costco is also reinforcing its value proposition
Costco approaches value differently than Aldi. Its warehouse model encourages customers to purchase larger quantities, while its paid membership program gives shoppers an incentive to return.
The retailer also sells national brands alongside its Kirkland Signature private-label products. During its most recent earnings call, Costco said Kirkland products save customers “at least 15% to 20% compared to the national brand equivalent with equal or better quality.”
Costco isn’t standing still on pricing, despite inflationary pressures. During the earnings call, the company discussed its own efforts to maintain competitive prices and return savings to members.
“Our members continue to show resilience in their spending, and they show a willingness to spend in discretionary areas where they’re seeing exciting new items at great value,” said Costco CFO Gary Millerchip.
“Our goal is to be the first to lower prices where we see opportunities to do so.”
Costco reported net sales of roughly $93.9 billion for the quarter, up 11.2% from a year earlier. Comparable sales increased 9.4%, or 6.7% after adjusting for changes in gasoline prices and foreign exchange.
The company also said it had reinvested some tariff refunds into price reductions on everyday products, including groceries and nonfood merchandise, reinforcing its emphasis on value.
Those results demonstrate that Costco’s membership model continues to attract spending, even as consumers remain attentive to prices.
But Aldi’s latest move illustrates how competition for grocery budgets extends beyond warehouse clubs.
Aldi doesn’t need to replicate Costco’s membership program or bulk-shopping experience to gain ground. By lowering prices on frequently purchased items, it can give shoppers another reason to visit its stores and leave some purchases off their Costco shopping lists.
If customers come to view Aldi as the more affordable option for everyday groceries, the retailer could strengthen its position in a market where Costco has long made value a central part of its appeal.
Maurie Backman owns shares of Costco.