- October 18th, 2016
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Lidl Is Coming: 12 Reasons U.S. Retailers Should Care
The German supermarket chain Lidl is planning to enter the United States by 2018 and has already begun recruiting managers. That gives U.S. supermarket chains a year to prepare for this budget chain’s entry. From its pricing to merchandise, here’s why they should care.
Walmart, the largest retailer in America, has failed in Germany. Now one of Germany’s biggest supermarket players is coming to the U.S. to see if its own unique model will be successful here.
Lidl, known for its competitive prices and private labels, is preparing to expand up the East Coast, from Georgia to New Jersey, by 2018. It has invested $77 million in a U.S. headquarters in Virginia, about $120 million in a distribution center, and in late August began seeking managers in 12 metro areas, including in Virginia, North Carolina and South Carolina.
According to Reuters, Lidl (pronounced leedle) plans to open 100 stores in America, an already crowded market: More than 38,000 supermarkets with sales of more than $2 million operate in the United States. That compares with 36,000 in 2011. Add to that all the retailers that have begun carrying groceries, from dollar stores to office supply chains, and we’ve got a lot of shelf space, a lot of boxes of cereal and detergent and bananas and milk.
In short, the market is not likely to support so many stores. Some will have to go.
What should U.S. consumers, and supermarkets, know about Lidl? I did some research and found the following 12 facts.
1) It’s big: Lidl is Europe’s largest discount grocery chain, operating roughly 10,000 stores in 26 European countries. By comparison, Kroger Co. – America’s largest traditional retailer – operates nearly 2,800 locations. Lidl posted 2014 revenue of roughly $62 billion.
2) It has rich roots: Lidl is owned by Germany’s third-richest man, Dieter Schwarz, who is the son of the company’s founder, Josef Schwarz. The younger Schwarz does not serve as CEO, however. He passed that baton in 2004 to Klaus Gehrig, who still serves as CEO.
3) Yet it’s simple: Lidl ranked as the world’s third-simplest brand in the 2015 “Global Brand Simplicity Index” by Siegel+Gale, which surveyed more than 12,000 consumers worldwide. To make the cut, Lidl had to prove itself transparent and honest, easy to understand, innovative and able to make its customers feel valued.
4) It favors caution over speed: The chain is careful when it comes to entering new markets. In Lithuania and Serbia, for example, more than five years passed between Lidl’s locating a field office and celebrating its first store grand opening.
5) It’s late getting here: Lidl had originally planned to enter the U.S. market in 2015, but the 2014 departure of its chairman and head of marketing reportedly caused it to put the plan on hold. This supports Lidl’s reputation for caution, but it also gave its arch-rival time to expand its U.S. presence.
6) Its top competitor is a German import: Aldi, another major discount chain, is considered Lidl’s top rival in Europe, and it may be its top rival in the states. Aldi, which has a roughly 40-year head start in America, in 2015 announced plans for a $3 billion U.S. expansion.
7) It is a “soft discounter”: Lidl offers a broader product portfolio and more brand names than a hard discounter, such as Aldi. Hard discounters are marked by a highly limited assortment that is dominated by private labels. Business Insider describes Lidl as a cross between Walmart and Trader Joe’s.
8) Its low prices are up high: While most supermarkets post their pricing below products, and that is where we are conditioned to look, Lidl positions its prices above. At the same time, prices on the bottom shelf tend to be lower and they get progressively higher as the shelves do, according to one report. So I might see a product on shelf five, look below it for the price, and think I am paying what is actually the price for the lower-cost item on shelf four.
9) It’s got the gold: In 2015, the Grocer Gold Awards in London named Lidl the Grocer of the Year. Entrants were required to detail their progress in growing, changing or improving their businesses and provide hard evidence of strategic success, including financials.
10) It just launched a rewards program: The chain’s new My Lidl program in the United Kingdom offers its subscribers (“Lidlers”) exclusive content from its resident chef, a chance to enter competitions and product sampling. The My Lidl website also includes chart forums, a space to enter product reviews and a blog.
11) It sells milk, bananas and office casual: Lidl stocks its European shelves with fashionable, not just functional, clothing. Included in its catalog (“look book”) of private label apparel are a zip-up casual blazer, satiny blouses and stylish skinny jeans.
12) It’s taking location suggestions: Lidl prefers to build its stores, and in the U.S. it’s inviting the public to help choose locations on its website. Specifications include a minimum of 4 acres of space near a busy intersection within 3 miles of a densely populated area. It also wants an area with minimum drive-by traffic of 20,000 cars a day.
In short, it wants what most other U.S. retailers want – the American consumer.
This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here.