While opening day crowds proved that customers will travel for a discount and the stores’ 36,000 square foot footprint (about 21,000 square feet of selling space) covering six aisles offer a variety of mainly private label items in grocery, frozen refrigerated. Also featured are fresh bakery items and pre-packaged meat, deli and seafood selections. The Lidl U.S. stores offer a limited selection of small kitchen appliances, outdoor furniture and toys. The stores in Virginia also include a limited wine assortment. Recently, a line of clothing from Heidi Klum was launched in Lidl stores.
Since the U.S. stores’ June debut, sales have reportedly failed to grow or even remain close to opening week levels, causing some in the industry to question the discounter’s overall strategy.
Lidl’s chief competitor in Germany and in other parts of Europe, Aldi, already has a 40-year head start on what many anticipated would prove to be a fierce rivalry in the U.S. During the past year, Aldi unveiled a new larger prototype (featuring more perishables) and expanded into California. It currently operates approximately 1,600 stores in 35 states in this country and has set the standard when it comes to small-format discounting.
Three days before Lidl’s debut, Aldi announced that it will invest $3.4 billion by 2022 to expand its U.S. presence. That would give the Batavia, IL based merchant approximately 2,500 locations making it the country’s second largest food retailer – following Wal-Mart – in terms of store count. The aggressive expansion effort is also expected to add about 25,000 new jobs. Aldi is in the last phase of its five-year $3 billion investment to reach 2,000 units by the end of next year and is spending an additional $1.6 billion to remodel 1,300 existing stores by 2020.
Additionally, other mainstream grocers in the U.S. have done an effective job of preparing for the much-anticipated Lidl debut, lowering prices and strengthening their brands to fend off shopper defections.
Further ramping up the competitive climate in food retailing was news of Amazon’s purchase of Whole Foods Market which came on June 16, one day after Lidl unveiled its first U.S. locations. On August 28, the day Amazon’s deal was finalized, it lowered prices on 50 often-purchased WFM products and saw sales increases as a result. It has also already begun to engage its best customers by linking its 80 million “Prime” members to store savings and unique benefit offerings. Moreover, many of Amazon’s e-commerce portals – Amazon.com, Amazon Fresh, Prime Pantry and Prime Now – have begun offering hundreds of Whole Foods’ own label items including such brands as 365, Whole Foods Market, Whole Paws and Whole Catch.
With more than 10,000 stores (the majority of which are in Europe), Lidl’s annual sales are approximately $100 billion and it ranks as Europe’s third largest food retailer, trailing only Carrefour and Tesco, and ahead of rival Aldi, which operates in 15 European countries and approximately 7,600 smallish European stores and an additional 1,300 U.S. stores which average about 18,000 square feet in size.
In other Lidl news, the neophyte U.S. discounter and the largest pure-play supermarket operator in the nation – Kroger – have agreed to dismiss a federal lawsuit that the Cincinnati chain brought against Lidl concerning Kroger’s claim that Lidl’s “Preferred Selection” private label and logo infringed on Kroger’s own “Private Selection” line. Last month, a U.S. District Court judge in Virginia denied Kroger’s request for a preliminary injunction that would have barred Lidl from using its “Preferred Selection” brand. He later ordered a trial to adjudicate the matter in January. With the settlement, each retailer will pay its own legal costs.