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Sommerfield Supermarkets
The knock-down in prices comes ahead of its final day of trading on Saturday, November 19.
Somerfield says it will re-deploy as many of its 20 staff as possible and says it is in negotiations over re-deployment within the store's parent company, The Co-operative Group.
The company said it is also working with job centres in the area to help staff find alternative employment.
A spokesperson for The Co-operative said the closure was simply because the store was not taking enough money.
Several competitors, including Tesco, have opened outlets across Lincoln in recent years, including one not a hundred yards from the Somerfield branch.
A statement from Somerfield said: "Staff at the store have been informed of the decision, which has been taken with the greatest regret.
"The closure is due to the store's poor trading performance and is not, in any way, a reflection on the commitment and hard work of the store team.
"Every effort will be made to redeploy as many as possible of the 20 staff with The Co-operative Group, or to help them find alternative employment."
The Echo understands that a pound shop chain has shown interest in the unit but nothing has been confirmed.
Chief executive of the Lincoln Business Improvement Group, Matt Corrigan said: "I think we've seen a lot of investment in city centre supermarkets.
"There have been four or five open in the last couple of years and some more convenience stores and clearly there's a limit to how much people can purchase.
"We hope that the property is let quickly because it's in a key position."
Simon Beardsley from the Lincoln Chamber of Commerce said: "They may be on the end of other supermarkets attracting customers.
"There is also where we are in the economy with people looking for the best value and probably switching allegiances more than in the past.
"It could free up space for a range of retail space, it's quite a big unit which might restrict it's opportunities.
"We hope it becomes occupied quickly because there's nothing worse than seeing shops under-utilised."
Call taker Victoria Richardson, 28, of Monks Road, Lincoln, said: "I won't miss out when it closes, I would rather go to Tesco to be honest because I would expect it to be cheaper and have good offers on. I think most people would choose Tesco."
The Co-operative Group CEO Peter Marks issued a robust defence of the retailer's problematic acquisition of Somerfield, calling it "the best acquisition we've ever made".
Marks told the IGD Convention the expansion had proved vital in letting the group modernise in the worst economic climate he had ever witnessed.
When asked if, with the benefit of hindsight, he would still have made the deal, Marks replied: "Unequivocally, yes."
He added: "Until five years ago, The Co-op was going down. We called it the co-operative movement, but we didn't co-operate and it didn't move."
Despite The Co-op's success, Marks warned the industry should get used to the brutal economic environment. "This just feels worse than the others," he said. "I don't think I have ever seen consumers as squeezed as this."