Will Aldi and Lidl replicate U.K. success in the U.S.?

Discussion
Photos: Aldi; Getty Images
Oct 19, 2016
George Anderson

The German discount grocers, Aldi and Lidl, have steadily grabbed market share in the U.K. over recent years to the point where the two combined account for a nearly 11 percent share of the grocery market. With Aldi ramping up its expansion in the U.S. and Lidl planning to enter the market in a big way as early as next year, the question is whether the two will achieve a comparable level of success here.

Aldi is a familiar banner in many communities across the U.S. The chain, which has grown to nearly 1,600 stores, began making in-roads with its small box stores in lower income communities that offer a limited assortment of primarily private label groceries.

More recently, however, the company has begun opening locations in towns where the consumers have greater financial resources. According to a Wall Street Journal article, Aldi says the majority of its most recent 500 store openings have been in suburban communities with middle-income consumers or higher.

As it expands, Aldi is counting on the lure of great prices on high quality groceries (Aldi has a no questions asked return policy) will be enough to achieve success in higher income towns. In recent years, Aldi has begun rolling out more upscale items under its SimplyNature line.

Lidl is busy setting up its supply chain system and nailing down store locations along the Eastern seaboard. The chain is also reported to be doing the same in Texas. Kantar Retail, in a new report, “Quantifying the Disruption,” projects Lidl will open around 100 stores per year in the U.S. reaching 630 by 2023. Initially, each store will generate an average of around $10 million in sales, climbing to $15.2 million over that period. If Kantar’s projections hold, Lidl will achieve total sales of $8.8 billion by 2023, more than the $8.1 billion Wegmans will do this year.

DISCUSSION QUESTIONS: What is your forecast for Aldi and Lidl in the U.S.? Do you see either chain being able to attract middle- and high-income consumers?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"As Baby Boomers continue to age and become seniors stores like Aldi and Lidl will provide these same benefits to a growing audience."
"I just don’t see it. As Ross points out, Dollar stores already serve a lot of the purpose Aldi and Lidl serve in the UK."
"From my experience visiting Lidl in Europe, their stores have a better look and feel versus Aldi, although Aldi stores have been recently upgraded."

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15 Comments on "Will Aldi and Lidl replicate U.K. success in the U.S.?"


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Ross Ely
Guest

Aldi and Lidl are going to have a tough time breaking into the U.S. grocery market, which is already heavily saturated. The current strong economy makes these stores less appealing to mid- and higher-income shoppers.

The stores appear to be one step up from dollar stores, which grew in popularity during the recession but have lost momentum in recent years. Aldi’s and Lidl’s leadership should proceed carefully to determine how their model can succeed in the U.S. market.

Adrian Weidmann
BrainTrust

Aldi has become a destination for my 88-year-old mother. The prices and quality of the grocery items are a definite draw. The limited selection is actually a benefit for her as she has simple needs and at 88 simply can’t navigate a large store. As Baby Boomers continue to age and become seniors stores like Aldi and Lidl will provide these same benefits to a growing audience.

Herb Sorensen
BrainTrust

Why do you think Amazon is making their true brick-and-mortar initiative something resembling a convenience store? Amazon is coming after the FOOD market, that thing which drove Walmart to a half-trillion in sales, because people need to buy food more often than any other thing, period. Take that as context for small “big head” supermarkets like Lidl and Aldi, who both have the price philosophy of Walmart, only avoiding the giant rat-maze stores to implement it. Again, like Amazon, with at least “smallish” stores with limited selection.

Hey, the typical household only buys 300 to 400 different items in an entire year. Did you ever notice that Stew Leonard’s operates a unique kind of “supermarket” with only 2000 SKUs? And generates around $100 million annual sales per store.

Yes, Lidl and Aldi will be a smashing success in the U.S. market. Aldi already has many years of experience in the Chicago market. Unless they have forgotten what they obviously know, why shouldn’t the latest advances in digital logistics move them into prime positions in U.S. retailing?

Richard J. George, Ph.D.
BrainTrust

As I indicated in an earlier RetailWire post, one only has to look across the Atlantic to see the impact of these two collective German retailers on the markets that they have entered and their disruption of the traditional supermarket. Aldi was once referred to as the silent killer, entering markets quietly and taking increasing share. Neither can be considered quiet entries.

I expect the same impact in the U.S. From my experience visiting Lidl in Europe, their stores have a better look and feel versus Aldi, although Aldi stores have been recently upgraded. Second, Lidl has more branded merchandise than Aldi, allowing them to be perceived as more Walmart-like in pricing and assortment in a smaller footprint. Aldi has been successful in the U.S. and I believe Lidl’s potential to attract middle- and high-income shoppers may be greater than that of Aldi.

Paula Rosenblum
BrainTrust

I just don’t see it. As Ross points out, Dollar stores already serve a lot of the purpose Aldi and Lidl serve in the UK.

Aldi opened a store near me, quite literally carving out a space in a Kmart parking lot, so it’s hard to call that “appealing to the middle class.” Technically speaking, they did open in a middle class area, but they found the lowest-end part of that town. I did shop there once and found the assortment chaotic and unappealing. I had no interest in returning and can’t even bring myself to stop in.

I know they will take credit cards now. At the time I went, they were still “debit cards” only and charged 6 cents per bag if you didn’t bring your own. The cashiers sat in comfy chairs while the shoppers did all the work. It was really weird to me.

I see no threat whatsoever in any market that is already well served.

David Livingston
Guest
1 year 9 months ago

Aldi has been going after the higher income customers for a long time. High sales volume and a low percent of EBT makes for a good Aldi store. Rough neighborhoods are not worth the trouble. Being near Costco, Target or Walmart has been rewarding. I think the projections for Lidl are overstated. They should prove to do well over time but it will take time to get accepted.

Aldi has a 40-year head start on Lidl and this is not Europe. Lidl has a huge learning curve to adapt to. Aldi will not be their primary competition. If our best grocery retailers start to lose market share, expect the response to be devastating to Lidl. The best approach should be like Aldi; slow, methodical and quiet.

HY Louis
Guest
1 year 9 months ago

If it takes Lidl 630 stores and seven more years to get to Wegmans’ 90 store sales level today, Lidl has a lot to overcome. First they are not that good. Sure they are better that most of the mediocre East Coast retailers like Food Lion, but they are not a high-level performer. Like someone here once wrote, all hat and no cattle. Wildly opening stores without testing them first has proven disastrous for Tesco’s Fresh & Easy. I predict Fresh Thyme to be the next one to crash and burn by opening too many too soon. Lidl might have an “oh no” moment after 50 stores and will perhaps stop at 100. In a couple of years we will probably hear Lidl blame the U.S. economy, the weather and the political environment for less than expected results. If Lidl is still here in 2023 it will because Publix, Walmart, Kroger, Wegmans and Wakefern want to have a last-place punching bag to pick on like they did with A&P.

Tom Redd
Guest

Lidl especially will attract middle- and high-income shoppers. Why? They have proven this in many countries and they have a strong focus on customer service. This service focus is mandatory at Lidl so it will be a new standard for retailers to beat. They also will pull shoppers away from current food retailers via the products, service and the store layouts. Aldi already knows how to tap the high-end markets — these people are more into logical purchases than they are into, “oh, I went to Whole Foods and paid through the nose for this small package.”

Lidl and Aldi are both experienced retailers that know how to move and change fast and believe in preparation and strong technology. Costco, Kroger and Walmart are safe — most other retailers in food, except the mid-smaller ones, are at risk.

Get ready for some food retail fun!

Mohamed Amer
BrainTrust
Each of these companies is on a different timeline in developing the U.S. market. For new entrant Lidl, it should do well in the U.S. without the need to attract high-income consumers. Similarly, Aldi’s continued success does not require that they go after high-income consumers as this would stray from the brand’s core foundation and perceived value equation. The middle-income household holds the biggest prize for both food retailers with disruptions starting at the low-end of the market. Aldi and Lidl have excelled in smaller format stores and with minimal dependence on national brands in their home markets. Both are very good operators and work to make the supply chain and execution to the store highly efficient. The key success factor will continue to be how well they maintain their limited range as they create relevant localized assortments that communicate ease and simplicity on one side and value and quality on the other. For anyone that has equated deep discounters with unhealthy food choices, they will be surprised by how successful the two companies will… Read more »
Roger Saunders
BrainTrust
Aldi may have first broken ground within a number of lower income communities, but they are a mainstream grocer in the minds of a very loyal base of shoppers across the country. Bet on them to continue to be significant winners as they march to neighborhoods that have all levels of household income in the coming years. Based on the Prosper Monthly Consumer Survey, Aldi is well-entrenched among adults, 18+, with 4 percent of the general population saying they shop their MOST often for groceries as of September 2016. That figure compares to 2.5 percent in September 2012. The silent generation, those born in 1945 or earlier, are strong supporters. 16.5 percent say that they have shopped Aldi in the past 90 days and 17.4 percent of silents have shopped Aldi’s cousin, Trader Joe’s, during that time. As Adrian Weidmann points out about his 88-year-old mother, if you mention Aldi to my mother she’s like a dog on a bone in terms of getting ready to head out. Older Baby Boomers, those born between 1946… Read more »
Craig Sundstrom
Guest

This seems like familiar territory, no doubt because we had an almost identical discussion 20 months ago … and I haven’t changed my opinion: they’ll both find plenty of success, but the similarity of names is likely to cause confusion.

Peter Charness
BrainTrust

I think they will find the US market not such easy pickings, but that doesn’t alter the fact that existing grocers can’t afford to have much market share siphoned off by anything. I’m not sure they will attract middle and high income, but they will take share. With Amazon starting and two tough discount grocers entering the market, even 5% of sales loss is more than most grocers can handle. So I do see a new spiral of innovation and consolidation here in the US.

Adam Simon
Guest
The US is a graveyard of European attempts to break into the grocery market. Fresh & Easy was the most recent which cost Tesco millions of dollars, and damaged irreparably the reputation of the CEO who led the company into this adventure. Previous attempts have been made by Auchan (in Texas) and Marks & Spencer (with Kings in New Jersey), in upmarket grocery formats, not low cost. The secret in the UK has been, in the wake of the financial crash of 2008, their broadening appeal to the middle classes looking to save money, and fresh food was a key differentiator — great fresh food at low prices. I am not convinced that this formula will be the breakthrough in the US which does not have the same appetite for fresh food. But don’t underestimate Aldi and Lidl — they are privately owned which means that immediate returns will not be expected. It has taken Aldi 25 years to make a leap forward in the UK — they entered the market in 1990. 2041 breakthrough… Read more »
Shilpa Rao
Guest

With a little store upgrade, Aldi and Lidl could provide a compelling value proposition to the middle income group. Organic, gluten free food at value prices, and with messaging on quality, these stores are here to flourish.

mike duff
Guest
1 year 8 months ago

No one need doubt whether Aldi will be successful in the United States. The company already operates 1,700 stores or so, although they don’t admit to that many. Aldi’s estranged cousin Trader Joe’s does pretty well itself. They succeed because they can provide private label food that actually is as good or better than what is available from national brands, plus they add items that you can’t get elsewhere. In the Aldi case, that includes imports of foods produced in Europe and imported as special presentations of, say, German food. I don’t know anyone who has tried shopping Aldi who hasn’t become a regular customer. Once you try one of their frozen pizzas, you are a shopper for life. I’ve never had a better one in 30 years of covering the food and retail industries.

wpDiscuz
Braintrust
"As Baby Boomers continue to age and become seniors stores like Aldi and Lidl will provide these same benefits to a growing audience."
"I just don’t see it. As Ross points out, Dollar stores already serve a lot of the purpose Aldi and Lidl serve in the UK."
"From my experience visiting Lidl in Europe, their stores have a better look and feel versus Aldi, although Aldi stores have been recently upgraded."

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