With the German supermarket powerhouse Kaufland cementing its plans to crack the Australian market, Woolworths Limited (ASX: WOW) and Wesfarmers Ltd's (ASX: WES) Coles could be in for some tough times ahead.
Kaufland, which recently purchased a South Australian site for its first major supermarket in Australia, operates more than 1,000 stores in Germany and Eastern Europe.
It will likely prove tough competition for Woolworths and Coles if Aldi's 2001 arrival in Australia is anything to go by.
Aldi's market share tripled from 2005 to 2015, going from 3.1% to 11.6% as the market share of both Coles and Woolworths decreased over that period, according to findings by Ray Morgan Research.
And Kaufland, a subsidiary of the Schwarz Group, the world's fourth largest retailer, looks set to claim its slice of the pie as it appears the supermarket chain has big plans for Australia.
"Kaufland has an ambitious Australian investment and development program," the company has stated.
"We are a growth-oriented corporation continually assessing our expansion possibilities in existing and potential markets."
And it appears Kaufland is already on the lookout for more sites in Australia.
It is rumoured that Kaufland is in talks with councils in southeast Queensland about the possibility of opening stores there.
That news comes as Aldi continues to grow with the company this year claiming a 13.2% market share, according to Roy Morgan.
And with Australia proving to be one of Aldi's fastest growing markets, Kaufland will enter with confidence.
With consumer spending reportedly waning, shoppers may be even more attracted to cheaper alternatives offered by Kaufland and Aldi as opposed to often higher prices set by Coles and Woolworths.
Adding to this, amid Amazon's imminent arrival, it appears the Woolworths and Wesfarmers Ltd share prices will suffer.
The Coles share price closed on Friday at $24.86, with analysts offering a 12-month price target of $26.81 and some predicting it will drop below $23.
The Wesfarmers share price closed on Friday at $40.97. Some analysts are tipping it to edge up to around $42.00 in the next 12 months. Others are not so optimistic, with one expecting it to drop to $36.00.
