Retail

Grocery Tracker: European Discount Supermarket Lidl Is Coming To U.S.

Americans, it’s pronounced “LEE-dil (Lidl),” and you’d better get used to it because the popular European discount grocery chain is coming to the States. Lidl, based in Neckarsulm, Germany,  plans to open 20 or more stores starting June 15 in North Carolina, South Carolina and Virginia, with 80 more to be added by the middle of next year.

“We are excited to open our first stores in the United States in a few short weeks,” Lidl President and CEO Brendan Proctor said in a statement. “When customers shop at Lidl, they will experience less complexity, lower prices, better choices and greater confidence.”

The American Lidl will focus on organic, gluten-free and locally sourced fruit, vegetables, meat and dairy, plus wine and coffee, the company told residents of a Maryland community where it’s building a store. Think Trader Joe’s meets Harris Teeter, a grocery chain based in North Carolina.

Lidl also sells appliances, furniture and clothing. And it’ll have a bakery right inside the doors.

“We will sell high-end brands, quality not quantity, best products only,” said the company. Ninety percent of the products in the new U.S. stores will be private-label brands that are free from synthetic colors, trans fat and added MSG.

Like Trader Joe’s, Lidl will operate within a smaller store footprint, making the experience less overwhelming for shoppers. The six-aisle, 20,000-square-foot layout will be about a quarter of the size of a traditional grocery store like Kroger.

Not only does that make things more manageable for shoppers, but it saves Lidl money. Keeping inventory lean as opposed to stocking several brands of the same product helps keep prices down. Customers will bag their own items in bags they bring from home, saving Lidl money at the register as well.

Could this spell trouble for Whole Foods and Trader Joe’s? What about Aldi, another German discount grocer that already has 1,600 stores in America and plans to open 600 more in the coming years?

It’s definitely a possibility. Lidl has sparked price wars between grocers across the pond, and its best-of-both-worlds approach to trustworthy, high-quality sourcing and rock-bottom pricing could give it an edge over established brands in the U.S. as well.

Though Lidl started in Europe as a discount grocer closely associated with Aldi, its research showed that discount grocery stores actually don’t do very well in the U.S. So instead of rock-bottom prices, Lidl will build its 600-store U.S. operation on quality products at a reasonable price.

But for its 10,000 stores in 27 European countries, discounts have been the secret sauce propelling Lidl to success over competitors. The U.K.’s four biggest supermarket chains, Morrisons, Asda, Sainsbury’s and Tesco, have seen their market share and profits slide as Lidl’s market share skyrocketed to 12 percent (that’s up from 5 percent five years ago).

To compete, Sainsbury’s said it was investing in two key growth areas, online and convenience, to attract mobile-savvy customers. It also recently acquired catalogue retailer Argos, which provides home and garden products, technology, toys and more to customers in Ireland and the U.K.

Lidl’s U.S. headquarters are in Arlington, Va. It will have warehouses in Maryland, North Carolina and Virginia. For now, Lidl is only opening stores in Virginia and the Carolinas – giving American grocers a little more time to plan their defensive strategy.

In Other News …

Lidl and Aldi aren’t the only grocery stores stocking more than groceries. How did grocery stores go from corner markets to massive chains selling 40,000 products, prepared food, magazines, charcoal, beach toys and patio furniture?

Food writer Michael Ruhlman explores the journey in his new book, “Grocery: The Buying and Selling of Food in America.” But Ruhlman also makes a prediction: that journey is about to come full circle.

As grocery delivery becomes more common, Ruhlman says, people will select it for the “commodity groceries” – the Cheerios, the cranberry juice, the products that are the same no matter where you buy them. In response, grocery stores are going to shrink and become more specialty stores selling hand-picked goods and overall better food.

In fact, that trend has already begun in the top U.K. supermarkets. The leading competitors are now stocking 10 percent fewer products. Across the board, U.K. supermarkets are stocking 5.7 percent less, an average of 930 fewer grocery products per store compared with last year.

That’s bad news for companies trying to push new products to market. Sales from branded new products are down by 6.5 percent. Grocery innovators are responding by launching fewer new branded products, and of the ones they do launch, only half achieve more than 33 percent distribution. That barely covers the cost of innovating a new product, said Tim Eales, strategic insight director at IRI.

Meanwhile, grocery delivery continues to gain traction, lending more credence to Ruhlman’s theory.

Instacart expanded to the Texas’ Rio Grande Valley and people liked it so much that the company had to hire additional shoppers. The grocery delivery giant partnered with Valley stores. including H-E-B, Petco, and Costco, and hopes to add more to its network in the area.

AmazonFresh, though it’s technically a pickup service and not a delivery one, also employs personal shoppers to find and bag customers’ groceries for easy pickup, and it just opened its first two U.S.  pickup sites in Seattle.

In the U.K., though, AmazonFresh pickup has been operating for a year now, and it may not be the game-changer people think it is. The service did pull the rug out from under online grocer Ocado, but it failed to steal market share from the Big Four supermarkets.

Still, when a company has as much financial clout as Amazon, one bad year isn’t going to send it packing. AmazonFresh has already launched in 260 postcodes across London, Surrey and parts of Hampshire, and the company sees long-term security in its young, tech-savvy, urban user base as they grow up and start families.

Traditional grocers see it, too, and they’re raising the bar on customer service to compete. They’re holding their ground for now, but only time will tell whether brick-and-mortar or digital will win the grocery war.

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