Taking Stock

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Publix, Lidl Struggle To Gain Traction In Ferocious, Evolving Richmond Market

It’s been about six months since the newest entrants have arrived in the Richmond market. Newcomers Publix and Lidl have both joined a very competitive, overstored fray and the early results indicate both chains have taken a few shots to the chin thus far.

Lidl’s struggles shouldn’t be surprising on several fronts. The anticipation factor for the German-owned discount chain was huge and, honestly, who could have lived up to that level of hype? Additionally, being the new kid on the block (as is also the case with Publix) almost always makes it more difficult to succeed, especially when you have to sometimes settle for secondary locations and all the other competitors in the market are waiting for your arrival. Tangibly, Lidl’s problems go deeper than that though. After six months of operation, it seems obvious that all those international minds who meticulously planned to offer a unique proposition to the American consumer significantly veered off course. Pricing remains strong, packaging is excellent, certain departments like bakery and wine are winners, but much of the remaining in-store shopping experience is confusing and uncomfortable. With some weekly store volumes hovering in the $140-160K range, there is reason for concern, perhaps alarm. Maybe it shouldn’t be shocking – given the level of ambition they started with – to see that Lidl has fallen short of its initial goals. The bigger challenge lies in its ability to adapt and redirect its efforts towards positive future change. To date, I’ve seen none of that. Yes, there’s been talk of utilizing a smaller footprint to reduce the number of perishable items and change the look of its god-awful general merchandise area. That might be slightly helpful, but Lidl’s problems are more complex than item assortment and aesthetics. The stores don’t flow very well; in-store conditions are far from crisp (especially certain perishable areas); and training seems mediocre at best (I’ve visited more than 20 units thus far including all five – including Fredericksburg – in the Richmond area).

We know that Lidl has already cut back or delayed some future store openings and plans to lease some locations in the future. It is also slated to open six more Richmond area units (including Petersburg and Williamsburg), but none are listed on its website as scheduled to open anytime soon. With deep pockets and a huge infrastructure commitment to its U.S. expansion, Lidl isn’t going away anytime soon – you’ve just got to wonder how they’ll fix the mess they’ve created.

While the shopping experience at the eight Publix stores (including Colonial Heights) now open in the Richmond market is vastly different from that at Lidl, there are similarities between the two retailers. Besides having money and patience to stay the course, both merchants plan to add more stores. Publix is building new stores in Mechanicsville and Fredericksburg and in the past four months has acquired two more former Martin’s units (which were both originally Ukrop’s stores) in Williamsburg and on Forest Hill Avenue in Richmond.

Having visited all the Publix stores in the market, my diagnosis is that the hugely successful Lakeland, FL-based chain is suffering from “corporatitis.” The symptoms are easy to recognize: inflexibility, shortage of local products and an inability to adjust to local competitive conditions. This is the same ailment that plagued Kroger more than a decade ago after they purchased about 10 Hannaford stores. It took several years for the poohbahs in Cincinnati to grant more decision-making power to those executives at field level in Richmond (and Tidewater).

Most of us know that Publix is rock-solid in terms of offering strong store conditions and quality customer service/training. That alone won’t get it done in Richmond where Kroger, Walmart, Wegmans and a slew of other retailers with diverse operating styles are already established.

Publix came into the market offering a minimally different package than in Florida, Alabama or Atlanta where it is the leading food retailer. Prices are slightly on the high side, perishables are decent, not above average, and its prepared foods lack creativity. In other words, an acceptable but sterile shopping experience. A few more signs of ‘corporatitis” that I also witnessed: Richmond isn’t Florida and there’s too much space devoted to Hispanic items, especially when considering that most of Richmond’s Latino community is centered in “Southside” where Publix doesn’t operate a store. Additionally, I saw a Publix ad recently promoting “local wines.” That might have been an effective promotion if the wines being promoted weren’t from North Carolina.

And while Publix has remained firm in not offering any type of loyalty card, the potential to mine data in a new marketing area would be a significant advantage to any incoming entrant. Especially when Kroger, Wegmans and Food Lion have offered loyalty cards to their customers for many years.

So, what’s the score at this point? In my analysis, Kroger, Walmart and Wegmans have been virtually untouched by the new competition and all three operators enjoyed strong holiday seasons. Even Food Lion (Ahold Delhaize USA), which many thought would be adversely impacted by Lidl’s arrival, has held its own, aided by the remodeling of its entire Richmond fleet and the addition of more perishables. Business at the four The Fresh Market units seemed to be down and Aldi’s business seemed to be slightly affected at three of the four locations near Lidl units that have opened.

Richmond remains a cluster jam. The current retailer lineup contains virtually all heavyweights and we’re still in the early innings. If there’s one takeaway thus far, it’s that the per-store average leaders (excluding club stores) – Walmart (Neighborhood Markets), Kroger and Wegmans – have maintained their solid market shares and have a clear strategy to maintain same-store stability and possibly even growth.

As for Lidl and Publix, both need to better adjust to local market conditions while also creating an improved shopping experience for potential Richmond customers who have more shopping options than perhaps any other market in the country.