Tariffs on imported goods are expected to soon impact both consumers and businesses, leading to higher prices and tighter budgets. However, not all retailers will be affected equally. According to Joe McKeska, principal at A&G Real Estate Partners, discount grocers like Aldi, in particular, are likely to see increased demand as shoppers seek out more affordable options in response to rising costs.
CHEAP PRICES AND OFFERINGS
This is for two reasons: the strong offerings at the grocery chain's stores and the consumer-friendly price points.
"They offer extremely low prices, usually 10 to 15% or more below Walmart," McKeska told GlobeSt.
"So consumers will find them to be extremely good value."
Part of the reason why Aldi can offer lower prices versus other retailers is due to its offering of private-label products. According to the German grocer, which operates about 2,500 locations in the U.S., more than 90 percent of its items on the shelves fit this bill. Using private label brands is known to save costs on marketing compared with national brands, allowing them to offer more lower-priced items.
STORE EXPANSION WILL OFFER ALDI MORE OPPORTUNITY
The expectation of higher prices comes after Aldi announced it would open more than 225 stores this year, with that number expanding to 800 by 2028.
McKeska thinks that will add to the grocer's opportunity, as more American consumers potentially flock to its stores to cut costs.
"I think you'll see a lot of continued growth in their business, both existing store sales and the ability to open new stores," he predicted.
NON-ESSENTIAL RETAILERS COULD FEEL PAIN
Currently, President Donald Trump has a 10 percent baseline tariff imposed on most countries. The full effect on costs at the grocery store and at other retailers has yet to be seen by everybody.
But once they do, McKeska said that discretionary retailers are bound to see the largest negative impacts from the tariffs. Namely, he lists footwear and apparel as categories to watch, as a large chunk of apparel comes from other countries and China, which has been hit with an astronomical 145 percent duty.
"Middle to lower income [consumers], I would say, are the ones going to be most vulnerable," said McKeska.
Meanwhile, he thinks upscale nonessential retailers like Nordstrom are more likely to be able to withstand the tariff impacts thanks to the resilience of spending from wealthier Americans. According to a recent report from The Wall Street Journal, the top 10 percent of earners in the country account for 49.7 percent of the entire spending.
"The upper-income customers are still doing pretty well," he noted.
UNCERTAINTY AHEAD
As things stand, it's tough to predict the economy. The truth is nobody knows for sure what will happen. This afternoon, Trump could announce a slew of trade deals and the suspension of major tariffs, which could change the trajectory.
But it's fair to at least expect lower economic growth in 2025 and a "bumpy" road, even if trade deals are reached in the coming weeks, according to McKeska. However, all bets are off if the current policy lingers longer than that.
"If this goes on for any time, and you start seeing company layoffs, that could start having a negative flywheel effect."
He cautioned that companies are currently "stuck in the mud" and will hold off on making tough business decisions about employment until they have a clearer picture of the economy's trajectory.
But retailers like Aldi are looking to expand in the U.S., and he wonders if those plans can change depending on how the economy responds to potentially higher prices and tariffs.
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