Will Lidl follow Aldi’s path in the U.S. – or Tesco’s?
Lidl, the German hard discount grocery chain, has big plans for the U.S. The same can be said for Aldi, another business founded in Germany, which is rapidly expanding its American store count. It was also true for Tesco’s Fresh & Easy chain, although that venture ended in failure. So, is Lidl ready to follow Aldi? Is it doomed like Fresh & Easy or will it go its own way?
News that Lidl is struggling to gain traction in the U.S. popped up a couple of weeks ago when it was reported by Lebensmittel Zeitung, a German trade paper, that the company had appointed Michael Aranda, former head of Lidl Spain, to a board in charge of overseeing the company’s fledgling U.S. operation.
Mr. Aranda was brought in, according to Supermarket News, over concerns that the performance of at least some of the 37 stores opened by Lidl since the summer has been “frighteningly weak.” Lidl’s corporate management believes that adherence to its system is key to the success in the U.S and brought in Mr. Aranda to impose greater discipline.
Concerns about Lidl’s performance in the U.S. were echoed in a recent Wall Street Journal article. Christopher Mandeville, a senior analyst for Jefferies & Co., described seeing only two shoppers enter a Lidl in Richmond, VA.
“It was completely crickets,” he said.
The same report, pointed to research by inMarket, which found that Lidl’s draw of all grocery traffic at stores in the Carolinas and Virginia went from three percent in June to two percent in August.
Lidl’s entry has sparked local price wars, according to reports by the Journal and the Financial Times. Rivals, from Aldi to Walmart, have responded with price cuts that have, in part, blunted Lidl’s attempt to lure customers away.
Ali Dibadji, senior analyst for the Sanford C. Bernstein & Co., told the Journal that Lidl needs to adjust its product mix. He pointed, as an example, to stores that emphasized organic produce when more locals bought conventional.
“It’s not about whether our model works in a market,” Will Harwood, a Lidl spokesperson told the Journal, “but what we do to adapt to that market.”
DISCUSSION QUESTIONS: Do you think Lidl’s experience in the U.S. is more likely to resemble Aldi’s or Tesco’s Fresh & Easy? What do you see as the key challenges Lidl faces as it expands from its present total of 37 stores to 100 by next year?