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Much of the talk in the supermarket industry revolves around the pending arrival in the United States of Lidl, a privately held company based in Neckarsulm, Germany, whose stores have had a powerful impact on markets across Europe. Now numbering more than 10,000 in 26 countries, Lidl supermarkets represent a compelling value proposition for many consumers.
The stores, which average 10,000 to 15,000 square feet, have proven exceptionally efficient selling vehicles. By restricting the product mix to a relatively narrow assortment of quality food and beverages sold at sharp prices, while maintaining a shopping environment that is consistently stimulating, Lidl has established itself as a force to be reckoned with.
Now the company has set its sights on this country. It has already established a U.S. headquarters in Arlington, Va., and it is making a $125 million investment in an 800,000-square-foot distribution center in Perryville, Md. Plans call for Lidl to open 150 stores in America during the course of 2018.
Industry observers expect the retailer to make a splash when its debuts here, even though, in this respect, it is decades behind Aldi, its arch rival among hard grocery discounters. Also a German company, whose two divisions are based in Essen and Mulheim an der Ruhr, Aldi entered the U.S. in 1976 and now operates about 1,600 supermarkets in 34 states. Although it is likely to be many years before Lidl can attain that kind of scale, several American retail executives who have visited both companies’ stores think that Lidl, which carries more brands than Aldi and has a perceived edge in product quality and customer experience, may well turn out to be a more formidable competitor.
The market that Lidl enters, however, will be a very different one than greeted Aldi 40 years ago. In the mid-1970s, traditional supermarketers were riding high, with the food/drug combination stores operated by many of them serving as the retail format of choice for numerous consumers. The status quo in subsequent years was shaken considerably with the growth of grocery discounters, the expansion of food and beverage offerings carried by members of other trade classes, the emergence of the supercenter format and, later, e-commerce.
That experience jolted U.S. supermarket operators, prompting them to pursue meaningful innovations as a way to win and retain the loyalty of shoppers. Kroger Co. chairman and chief executive officer Rodney McMullen exemplifies the new mind-set.
Speaking at The New York Times’ Food for Tomorrow conference last month, he highlighted the need for grocers to eschew a one-size-fits-all mentality. Asked what supermarkets will look like in 10 years, he said, “I don’t know that you can ever say a typical anything because customers are becoming so diverse. If you look at where this is going, part of it will be online, part of it will be ‘I want to pick up dinner,’ part of it will be delivered, part of it will be people are still social animals and want to shop, and part of it will be small store. If you look at what we’re trying to do, it’s to make sure that it’s a completely seamless experience for the customer.
“Things will be personalized. If you’re more focused on value, then the content that you will see will be more value based. But you can decide do you want to stop by and pick your order up on the way home or do you want to shop. We’re already doing that in over 400 stores today.”
Lidl has honed its model over many years, giving it reason to be confident as it moves into the U.S. But in a market where the multiplicity of consumers is mirrored by the multiplicity of food shopping options, Lidl will have a tough fight on its hands.
