Is Lidl Rethinking Grocery Retailing?

Lidl logo

America’s teeming food-retailing landscape is going to get even tighter. Lidl and ALDI, two of Germany’s keenest discount retail competitors, are poised to continue their longtime intense European rivalry in the U.S. marketplace with the opening of Lidl’s first 20 stores in North Carolina, South Carolina and Virginia in the spring of 2017. The chain will add another 80 stores by mid-2018, establishing a strong footprint with which to go head-to-head with ALDI and pose a formidable threat to many of America’s established food retailers. What this means for U.S. consumers is they are about to add yet another retailer to the growing array of food retailing options. And Lidl’s low-pricing strategy will be a significant draw.

While low prices may be sweet music to consumers’ ears, it’s not a tune many U.S. food retailers want to be playing — but one they may be forced to find a conductor for if they have any hope of retaining market share. To counteract the aggressive growth plans of Lidl and ALDI, Walmart, for example, has been retooling its deep-discount pricing strategy. But is low pricing alone enough for shoppers?

Most likely not, and Lidl understands there is more to shopping than the allure of the bargain.

With Intense Emphasis on Low Prices, Shopping for Food in America Is About to Get a Whole Lot More Interesting — and Competitive

During our “Great Recession” (circa 2008), a good deal of discussion centered on how Americans were going to rapidly “trade down,” and big things were predicted for bargain-driven retail formats that sold groceries as shoppers theoretically flocked to discounters like Walmart and Dollar General. Instead, consumers seemed to enjoy including yet more discount options in their ever-broadening food shopping habits and, rather than embrace any one “kind” of retailer, chose to shop all types of food retailers ranging from discount to fresh-format premium — and everything in between.

Post-Recession, virtually all of today’s leading discount retailers have taken the food-laden history lessons of iconic discount merchandisers and embraced them in their own operations, specifically as a key tool for driving traffic to their stores?

Lidl comes to America

ALDI has been in the U.S. since 1976 and has seen the ebb and flow of economic conditions and shifts in shoppers’ behaviors and consumers’ preferences. From our perspective, ALDI has accidentally reinvented pantry stocking in America by subversively eliminating the variable brand and the shopper marketing that goes along with it. ALDI has also eliminated the variable of price, for there are no price comparisons in a store with only one offering in every category. An ALDI shopping trip is therefore radically simpler: no thinking about brands, BOGOs, deals, price comps, coupons, sudden endcap promotions or in-aisle shopper marketing. ALDI’s smaller-footprint stores also make for a quick shopping trip.

As we concluded in past assessments of the ALDI shopping experience, ironically, the only variable left in the shopping trip is: the food. This is a powerful disruption for highly utilitarian shopping trips where shoppers just want to get the stuff on their list and get out.

Our own Food Shopping in America 2017 report details how the consumers’ path to purchase, across all channels, has become more complex and multifaceted and has logistically veered off its previously well-traveled route.

Which brings us to Lidl’s entry into the U.S. food-retailing landscape.

In July 2017, a few weeks after the unveiling of the fi­rst Lidl stores in America, we devoted a week to careful study and analysis of Lidl stores in Virginia and North Carolina. To get a sense of how consumers might respond to Lidl, we visited four Lidl locations in Virginia and North Carolina.