Lidl is ahead of schedule for U.S. store openings

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Photo: Getty Images
Feb 16, 2017
George Anderson

The German grocery chain, Lidl, is anxious to enter the American market and so far, at least, progress has been good. The company has announced plans to open 20 stores this summer in the Carolinas and Virginia. The chain, which plans to open 100 stores along the East Coast within its first year of operation, was not initially expected to begin opening locations until 2018.

Lidl, according to a Washington Post report, plans to open stores in the U.S. that have about 21,000-square-feet of selling space, about 35 percent larger than their counterparts in Europe. Inventory, as in the other 27 countries in which Lidl operates, will be streamlined.

“A lot of the supermarkets are so large, it’s a challenge for people to go shopping,” Brendan Proctor, CEO of Lidl US, who previously ran Lidl’s successful business in Ireland, told the Post. “If I wanted to go in and get a bottle of ketchup — first of all, there are probably about 24 aisles in the store. I have to find what aisle it’s in. I get there, I find that there’s 50 types of ketchup. Who honestly needs 50 types of ketchup?”

Lidl has made tweaks to its format in the U.S., including a different store façade. It turns out that Americans were reminded of car dealerships when they saw Lidl exteriors from Europe. Other changes include refrigerated beer and sampling in the store’s bakery department.

Lidl, according to a Kantar Retail report released last year, will open about 100 stores annually, reaching 630 units by 2023. Sales at the stores are expected to average about $10 million annually to begin, eventually climbing to more than $15 million. Total sales in the U.S. are projected to reach $8.8 billion over the next six years. To put that into perspective, the popular Wegmans chain’s sales were roughly $8.1 billion last year.

DISCUSSION QUESTIONS: Do you think Lidl is prepared to take on the American grocery market? What are the biggest challenges it will face? What will its presence mean for established grocers in the markets where it will open stores?

Braintrust
"Lidl is going to need some unique selling proposition in order to succeed. Tesco's failure in the U.S. ought to be a warning sign."
"Not discussed here, but mentioned elsewhere was Lidl’s observation that “American’s don’t like discount grocers.” I think this is correct..."
"Lidl will make a big splash in the U.S. Their stores fill an important niche in Europe and they’ll do the same here."

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16 Comments on "Lidl is ahead of schedule for U.S. store openings"

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Dick Seesel
BrainTrust

I’ve been in a couple of Lidl stores in Europe, and in some cases they carry more variety than a typical grocery store. To make it work in a small footprint (by U.S. grocery store standards), the assortments will need to be tightly edited — as Lidl indicates it is willing to do. But Aldi (with its sister brand Trader Joe’s) already has a big head start in the U.S., so Lidl is going to need some unique selling proposition in order to succeed. Tesco’s failure in the U.S. ought to be a warning sign.

Max Goldberg
BrainTrust

Lidl is trying to enter the U.S. market by fitting between traditional large grocers and dollar stores. If they have the right assortment, at the right price, they could succeed. This means more competition and pressure on traditional grocers. Regular Lidl customers could visit grocery stores less frequently, preferring them for harder-to-find items that Lidl won’t carry.

Paula Rosenblum
BrainTrust

Not discussed here, but mentioned elsewhere was Lidl’s observation that “American’s don’t like discount grocers.” I think this is correct, and Aldi is tweaking its format as well.

If Lidl can look more like Trader Joe’s and less like a dollar store, they’ll do well. I hope they’ve had “boots on the ground” here for a while. One of my Aldi observations is that their store locations aren’t exactly right for the market they are going after. That’s because they don’t understand neighborhood nuances.

I’d use a Miami example, but it will likely be lost unless you live here. But think about having a “good” postal code, but being in a “bad” neighborhood. That’s what Aldi managed to do.

Ross Ely
BrainTrust

Lidl has a reputation as a very good operator and should be successful in the U.S. Its German counterpart Aldi has grown with a similar limited-assortment, private-label-centric, low-cost model. Lidl appears ready to take on the hyper-competition and low margins of the U.S. grocery industry.

Established U.S. grocers will have to step up their game against Lidl with higher execution across their entire business. They will need to understand their shopper data and promote intelligently to their top shoppers to retain them in the face of new competition.

Camille P. Schuster, PhD.
BrainTrust

While a smaller footprint than the stores in which U.S. consumers normally shop provides convenience in terms of time, it provides a major assortment challenge. While consumers may not need or want 50 brands of ketchup, offering fewer choices makes it essential to offer the selection the consumers coming to that store want. Getting the assortment means knowing the consumers at each store really well and matching the assortment to them. That is the biggest challenge, especially when entering a new market. You have to get it right to be able to build a consumer base.

Richard J. George, Ph.D.
BrainTrust

The Germans always do their homework so I am confident that Lidl is prepared to take on the American grocery market. The biggest hurdles will be logistics issues related to store roll-outs and integrating into the U.S.’s culture. Having said this, I have visited Lidl operations in Germany, the UK and Ireland. The company does a terrific job of integrating into each market it serves. Lidl will bring new challenges to established grocers in the markets it plans to enter. Think of Aldi on steroids. It intends to address current customer food shopping compromises. In addition, it plans to offer more branded CPG products. In preparation for the Lidl entry, I recommend traditional retailers address the food shopping compromises in their stores and preempt Lidl’s efforts in these areas.

Tom Redd
Guest

First, Lidl is a very smart retailer. They have been on the ground in the U.S. for two years or more and know how to fit the food space. This is how they have been so successful in so many countries — they are running about 10,000 stores at this time. They also have an infrastructure in place that is set to adapt to other countries. They are pros at opening in new regions/countries and mapping assortments to fit these areas. They are unique and will launch at the right time and place. Watch for the launches and enjoy Lidl — where you can easily find the ketchup you like.

Brian Kelly
Guest
5 months 5 days ago

Lidl has Aldi to learn from. Plus Tesco, but the selling model was quite different.
The hurdle of “discount grocery” is noted. Store location strategy is the biggest challenge.

The selling model needs to be relevant to the trading area constituency. It seems the small-market strategy of dollar stores would deliver a constituency in need of discount grocery.

Otherwise, a “retooled” Lidl will square off against entrenched competition which has battled Whole Foods, Trader Joe’s and Aldi plus the updated regional chains — AND Walmart, Target and Kroger.

Or as one hears at the weekend farmer’s market, “retail ain’t for sissies!”

Ron Margulis
BrainTrust
Lidl will make a big splash in the U.S. Their stores fill an important niche in Europe and they’ll do the same here. They aren’t Aldi and don’t have that deep-discount image that might inhibit a good chunk of shoppers from even trying it. They aren’t Fresh & Easy, which tried to push an unneeded and unwanted format. What they are is curious. They have taken their time to understand the marketplace and the opportunities available. I ran into Lidl researchers at trade events more than four years ago — they didn’t identify themselves as such, but it was clear who they were. I’ve visited Lidl stores in Germany, Holland, UK, Switzerland and Ireland. They are all different, trying to appeal to specific market demographics. Even within countries, there are assortment and merchandising nuances in the stores to address regional desires. In this way, they are really like Kroger. At the recent FMI Midwinter conference, I asked the president of one of the leading supermarket operators on the East Coast about Lidl and he said they have been planning to compete head-on with them for more than a year. That’s the attitude needed to meet the challenge Lidl will present… Read more »
Mohamed Amer
BrainTrust

Entering the US grocery market is not for the faint of heart. Lidl has taken their time to study and explore their ideas. They’ve taken notice of what is working (Trader Joe’s, Aldi) and what has not (Tesco’s Fresh & Easy). Also, Lidl is aware of how the traditional grocery segment has responded to new entrants such as Whole Foods in the 1980s and ’90s and to Aldi’s discount model or Trader Joe’s fanatic customer base.

The biggest challenge facing Lidl is translating those understandings to a differentiated store experience for a skeptical customer base wondering why they need one more grocery chain from which to choose. Focusing on one region to establish their presence is a good approach. Marketing and communicating with their future customers and how they execute in the stores they open will determine Lidl’s success in executing their strategy. The potential is high, but so is the risk. My bet is on Lidl to make this a big success despite some bumps along the way.

Craig Sundstrom
Guest

It’s encouraging that they’ve already found things to change, as it shows at least a little research; is it enough …does the U.S. need (yet) another grocery chain … if the results are “OK” but not what was hoped for will they stick around or will it be Fresh/Easy2.0?
We’ll just have to wait to find out (though I don’t put much stock in the $8.8B projection: when I was eight I “projected” I’d be President … and look what happened.)

Cathy Hotka
BrainTrust

Test, test, Test. Tesco took its time coming here, did a lot of homework, and still failed. Lidl will want to absorb learnings from each store to refine that offering for American tastes.

David Livingston
Guest
5 months 4 days ago

Tesco really didn’t do any homework. They designed their research results to match their conclusions before they started. Beats me why Lidl is doing the same as Tesco. Building a bunch of stores without testing. Why not build one or two and see if they work? Whole Foods did this in England, building about 9 stores.

Brandon Rael
BrainTrust

Lidl can make an immediate impact if it has all the insights, and awareness of the local markets, in order to provide localized assortments at the right price. The few times I have shopped at a Lidl, I found the experience to be quite positive, and in my opinion, quite the equivalent to a Trader Joe’s model.

What could make Lidl stand out is to stay on top of the current trends is the following:

1. Non-GMO,
2. Locally sourced organic produce
3. gluten free products
4. Product Transparency
5. Most importantly price

Very interested to see how this plays out, as well as how this may impact the Whole Foods, and Trader Joe’s of the world.

Mark Price
BrainTrust

Lidl, with their limited assortment and small footprint, may find themselves squeezed between the expanding capability of convenience stores and the broad array of prepared foods and packaged goods at American grocery stores. Aldi has been effective in very specific areas where price sensitivity is the highest (under-served communities and geography.

The key to success will be (as always), successful differentiation from the lower-end and higher end competitors. Also, I do not know if Lidl has loyalty cards to track and influence customer behavior. If not, that would also be a barrier to success.

David Livingston
Guest
5 months 4 days ago

Tesco did zero quality research. As for Lidl, I had some experts at the NGA conference tell they would fail. I don’t know, but my gut feel is they will fail. They should open a few stores first before promising hundreds and building distribution centers.

We’ve seen it before with Tesco coming to the USA, Target going to Canada, Walmart going to Germany. Big companies make boneheaded moves sometimes. Decisions like this are made by human beings, not supernatural beings. Some of those who say Lidl will be a big success are the same ones that said Tesco’s Fresh & Easy would be successful. Lidl’s biggest challenge will be to know when to give it up. I predict hyped press releases about how great they are doing.

wpDiscuz
Braintrust
"Lidl is going to need some unique selling proposition in order to succeed. Tesco's failure in the U.S. ought to be a warning sign."
"Not discussed here, but mentioned elsewhere was Lidl’s observation that “American’s don’t like discount grocers.” I think this is correct..."
"Lidl will make a big splash in the U.S. Their stores fill an important niche in Europe and they’ll do the same here."

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