Discount supermarket Aldi may soon be facing competition from other European rivals in the lucrative Australian grocery market.

According to a Fairfax report, other cut-price European grocery chains like Lidl and Netto may soon seek to launch in Australia as shoppers become increasingly frugal.

Australians have embraced the no-frills supermarket format, with Aldi claiming a 10 per cent share of the east coast market in just 10 years.

German-owned Lidl, which is currently enjoying a share of the UK market, is reportedly scouting for sites in Australia, as well as speaking to potential suppliers.

Commonwealth Bank analyst Andrew McLennan said that there was room for a second discount supplier in Australia.

“Based on the trends from international markets and the apparent willingness of Australian consumers to embrace the format, we see potential for another discount retailer to enter the Australian market,” Mr McLennan said in a report released this week.

Mr McLennan said that supermarket giant Woolworths, which has the biggest profit margins in the world, had the most to lose.

“Like Tesco, we see potential for Woolworths’ food and liquor margins to come under pressure, but we recognise Woolworths does not have the same exposure to superstore formats and is well positioned online in Australia,” he said.