First look how German grocer plans to top the US market
ON A BUSY street in Fredericksburg, Virginia, a tall, black security fence guards a sprawling - and, for now, largely empty - brick-and-glass building.
The under-wraps facility is a prototype store for Lidl, a German grocery chain that has been working for more than a year to plot its entry into the US market. The company is using the space to test which details appeal to American shoppers: To hit on what kind of signage looks good dangling from the ceiling, to figure out how many aisles makes for the most efficient movement through the store.
Lidl ( pronounced lee- duhl) is a global grocery juggernaut, with 10,000 stores in 27 countries. It has made its name offering a limited assortment of goods, many of them private label, at ultralow prices.
Now, it is ready to descend on America, potentially throwing a disruptive curveball in a retailing category that is already scrambling to adapt to new pressures, including the growth of online shopping and competition from non-traditional rivals such as drugstores.
Lidl is set to open 20 stores this summer in Virginia, North Carolina and South Carolina, an earlier debut than the 2018 time frame that it initially targeted. Within 12 months of opening its first US stores, it is slated to have 100 locations up and down the East Coast.
One thing that is instantly noticeable in the prototype store: It is significantly larger than what is typical for Lidl overseas. With about 21,000 square feet of shopping space, US chief executive Brendan Proctor says, this store is 35 per cent larger than some of the chain’s biggest stores in Europe. The company decided to go with a larger format because it thinks that it will need to offer a wider array of items to thrive in the US market.
That’s just one of many tweaks that Lidl is making to its formula to address the expectations and habits of US shoppers. It is offering chilled beer, for example, and free samples in its bakery department - things it doesn’t do elsewhere but that Proctor says are “normal” here. When it comes to the exterior of the store, focus groups were initially shown a design that hewed fairly closely to what Lidl stores look like in Europe. Turns out, US consumers thought it looked like a car dealership. That sent Lidl back to the drawing board.
In other key ways, Lidl will stick to its usual game plan. Walking through the prototype store, past the refrigerated cases that will one day hold desserts, snack trays and cheeses, Proctor explains the strategy.
“A lot of the supermarkets are so large, it’s a challenge for people to go shopping,” he said. “If I wanted to go in and get a bottle of ketchup - first of all, there are probably about 24 aisles in the store. I have to find what aisle it’s in. I get there, I find that there’s 50 types of ketchup. Who honestly needs 50 types of ketchup? So we can streamline that.”
Lidl will aim to offer a tightly edited assortment, including familiar brands but also plenty of private-label goods. The current model includes just six aisles, a store layout that executives hope is conducive to easy navigation and flow. Other goods, such as produce, are displayed in islandlike groupings. To make things efficient and to keep costs down, you might see items on shelves in the cardboard boxes they were shipped in.
As it does elsewhere, Lidl will feature a large section dedicated to non- grocery items. Proctor said that shoppers can expect to see items as diverse as drills, yoga pants and garden lawn mowers in this part of the store, which is to feature a constantly rotating array of items that cycle in about every week. That could be an interesting way for Lidl to differentiate itself in the market, and it could introduce a T. J. Maxx-like “treasure hunt” vibe to the stores.
As Lidl begins its march up
The under-wraps facility is a prototype store for Lidl, a German grocery chain that has been working for more than a year to plot its entry into the US market.
and down the East Coast, it is not yet clear which rival chains will be most affected by the new competition. Lidl shares attributes with Aldi, another German discounter, which has more than 1,600 stores stateside.
However, Mike Paglia, an analyst at Kantar Retail, said that the most affected retailers could end up being the likes of Giant and Safeway, which he said aren’t bringing anything particularly different to the marketplace.
Lidl has some 1,400 workers in the United States already, and it is poised to add 4,000 more when it opens the stores. As it tries to build a customer base, Proctor has pinpointed exactly what the chain is going to have to prove.
“When we work with our focus groups, there’s a challenge for a lot of our future customers,” Proctor said. “They’re saying, ‘Okay, but can you really get good quality at these prices?’ ”
And so at US headquarters in Arlington, Virginia, work is underway to try to ensure that Lidl delivers quality that sets it apart from competitors. Wine director Adam Lapierre estimates that he has tasted 10,000 wines as he curates the chain’s US assortment.
In a test kitchen area, buyers might check a shipment from an apple supplier to make sure the fruit is crisp.
Others will prepare frozen pastries from suppliers using the same oven models that are to be used in stores, settling on the temperature and moisture levels that are needed to make them best.
Meanwhile, the team is working with suppliers to ensure that the floral bouquets don’t have blooms that open at different times. ( Varying blooms, Proctor said, usually signal that the flowers haven’t been consistently stored in a temperature- controlled environment.)
And they’re strategising around ways to cut waste as part of an effort to keep prices low. That includes evaluating such factors as the type of lighting used in the stores and the frequency with which the bakeries will make fresh bread.
Lidl would not discuss its marketing strategy. — WPBloomberg