Lidl Is Here to Win—Are You Ready?

August 1, 2017

After months of anticipation and speculation, German grocery discount chain Lidl finally opened its first U.S. stores in Virginia, North Carolina and South Carolina in mid-June. As I waited in line at the first grand opening with fellow members of the cross-functional team at Daymon who have been studying Lidl’s business model and operations, I couldn’t help but wonder: Would Lidl’s U.S. debut live up to the grand expectations that had been set? Were we about to witness the beginning of a new era of retailing?

The answers to those questions are still slowly being revealed, with our first views inside Lidl U.S. matching many of our team’s predictions and delivering some unexpected surprises. On the expected side, the store layout is based on Lidl U.K.’s recent “Lidl of the Future” format.  Its brand strategy is also similar, with four quality tiers, including “Global Brands”—imported products being offered under country-specific labels like Duc de Coeur (from France) and Italiamo (from Italy).

What was somewhat unexpected was the lack of branding for its private label, national brand equivalent (NBE) products. While Lidl stores in other countries use category-specific brands, most items in the U.S. do not. For example, if you buy roasted peanuts, the package will simply say “roasted peanuts.”

Another surprise was the fact that many of its NBE were sourced outside of the U.S.—even things like canned corn and canned peaches. In some cases, this means the quality has suffered. Lidl gets a lot of credit in the U.K. and Europe for having great quality products, but our testing here has shown some products don’t hold up to quite the same high standards.

Traditional grocery retailers shouldn’t interpret these signs as missteps or negatives on Lidl’s part, however. Our belief overall is that the U.S. operations are still ramping up and as they do, sourcing and quality will continue to improve. The discounter has faced challenges as it entered other markets, and it has always overcome them. The assumption should be that Lidl is here to stay—and here to win.

So what should other retailers be focused on? Understanding what they have to offer that Lidl doesn’t. Because while Lidl may have low prices and beautiful stores, they don’t have a vast assortment, many services and many associates. There is room to compete. But the time to act is now.

James Hedges is the Senior Manager, Category Solutions for Daymon

 

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