Taking Stock

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Lidl Unveils First ‘Smaller’ Discount Unit In Aberdeen, MD

Lidl, the German discounter whose 20-month foray into the U.S. has generally been disappointing on several levels, unveiled its first downsized unit last month in Aberdeen, MD.

The 25,000 square foot new store, which has been on the books since 2016, is located on Route 40 in the Harford County berg about a half mile from a smaller, six-year old Aldi unit and a large Walmart SuperCenter.

By early 2018 Lidl had opened about 50 U.S. stores, many of which have been underperforming. Parent company Schwarz Group took notice and the discounter’s CEO Klaus Gehrig criticized his company’s U.S effort for choosing bad locations and not properly recognizing the shopping habits of U.S. consumers. Additionally, Lidl U.S. cut back on the number of stores it would open, fired its U.S. CEO Brendan Proctor and replaced him with veteran European executive Johannes Fieber. Lidl also said it would look to build smaller, more efficient stores in the 15,000-25,000 square foot range rather than continuing to open stores that were about 36,000 square feet in size. Lidl is also revising its real estate policy and now will lease new stores as opposed to its original plan of acquiring real estate and building stores on that site, a very costly proposition.

Lidl owns the site in Aberdeen, and the interior changes that come with a 35 percent footprint reduction are almost unnoticeable. However, the store’s exterior is quite different from the original U.S. design which Gehrig described as “glass palaces.” The architecture utilizes more brick than glass and Lidl merchandises its “Rethink Grocery” on the front of the store along with its distinctive yellow, blue and red sign.

And unlike many Lidl stores, business has been very good during the first three weeks. As is the case with many other Lidl units, the retailer’s in-store bakery is the highlight of the store. But unlike its more than 50 stores in Virginia, North and South Carolina, there is no beer and wine department because of state law restrictions, something that the discount merchant also faces as it expands into Pennsylvania, Delaware and New Jersey.

During the past month Lidl opened its first two Georgia stores (giving the chain 66 units in the U.S.) and closed on its first U.S. acquisition, the 27-store purchase of Best Market whose stores are primarily located on Long Island. The company said it would begin converting those perishables-driven supermarkets to the Lidl format this spring with the process continuing for 2-3 years.

Although I’ve been among Lidl’s biggest critics (my main complaint echoes Gehrig’s bemoaning of the lack of understanding of the U.S. consumer), it’s way too early to count the company out. Not with its tremendous success in Europe and its deep well of capital.

Clearly, the company should have never been “all-in” on acquiring its original real estate. Huge infrastructure commitments including four distribution centers and a palatial headquarters office in Arlington, VA could have been tempered, too.

With its other Maryland store in Bowie doing relatively well, too, Lidl is clearly learning from its initial U.S. misreads. However, as we all know, Lidl is still the new kid on the block and as such is climbing uphill against an overstored, diverse group of retailers.