Dive Brief:
- The method Lidl chose to use to enter the U.S. isn’t working because the more affluent consumers the German retailer wants to attract associate low-cost grocery with low quality, according to TheStreet. Instead of drawing Trader Joe’s and Whole Foods-style shoppers, Lidl has ended up fighting for the same customers as Aldi and Walmart, and it isn’t winning.
- Additionally, the publication points out that the low-cost, low-frills in-store shopping environment of Aldi and Lidl run counter to today’s grocery trends, which emphasize an omni-channel presence and enhanced in-store shopping experience. J. Neely, Accenture’s global M&A strategy practice lead, told the business publication that the “challenge in the grocery industry is mastering the correct mix of channel offerings, including online, subscription, brick-and-mortar, delivery and so on.”
- Walmart is viewed as having a leg up on competitors such as Aldi and Lidl for several reasons, including its growing online/digital capabilities, expanding private label programs, one-stop shopping appeal, and highly efficient operations that help the retailer maintain highly competitive prices.
Dive Insight:
Walmart has an incredible advantage over the likes of Lidl in capturing market share in the U.S. For one, sheer size and scale give it an immediate boost. Walmart has more than 4,600 stores located across the country; Lidl could have 600 U.S. stores by 2022 projects, according to Bernstein analyst Brandon Fletcher.
American consumers are intimately familiar with Walmart, what it stands for and how to shop in its stores. It’s an American institution. The retailer estimates that 90% of the nation’s population lives within 10 miles of one of its stores. It also says that it can deliver to 87% of Americans with next-day ground shipping and 99% of them within two days, according to TheStreet.
For Lidl, this kind of mass, proximity and familiarity will be hard to beat. On top of that, the world’s largest grocer has intimate knowledge of its home country, its consumers and their shopping patterns — something Lidl is still learning about. Walmart keeps close tabs on what, when and where consumers buy, and what their path-to-purchase looks like. And Walmart, along with the rest of the nation’s grocers, has had about three years to prepare and position for Lidl’s U.S. entry.
With all signs pointing to U.S. grocery moving online, Walmart, unlike its smaller counterparts Lidl and Aldi, is positioned to capitalize. It is pumping a huge amount of capital into building — or buying — online capabilities and figuring out how to marry physical and digital assets. The retailer recently opened its 1,000th Grocery Pickup location on its way to a nationwide rollout in the coming years.
In a little over a year’s time, the retailer acquired Jet.com, along with additional e-commerce startups include Modcloth, Moosejaw, Bonobos and most recently same-day delivery company Parcel. In the past month alone, Walmart has unveiled “Mobile Express Returns,” gone live with Google voice ordering, and showcased the future of VR through its Store No. 8 startup incubator unit. Jet.com is now launching its own private label grocery brand, Uniquely J, too. The company is clearly on a digital path to get ahead.
It’s been reported that Walmart’s prices are about the same as Lidl’s. Walmart also purposefully lowered prices in its stores near the Lidl locations as a preemptive move. To keep prices low, Walmart constantly pursues cost-cutting measures to improve productivity. It’s been widely reported that the retail giant leans heavily on suppliers to lower their costs and prices. TheStreet reports that a grocery veteran said that when it comes to pricing, Walmart is much more combative with vendors than it's been in recent years.
Stacking Walmart up against Lidl, the entrenched U.S.-based retail giant looks like the clear winner. The retailer offers a complete one-stop shopping destination, offering more than 90,000 SKUs in-store and virtually an endless aisle online. Americans know Walmart and what to expect when shopping there. It not only dominates U.S. grocery, but sells a lot of high-margin general merchandise, too.
In contrast, Lidl stores are new to Americans — and under the current model, it's difficult to discern what the retailer stands for. Stores are small, just a fraction of the size of a Walmart, and carry a limited assortment of predominantly low-priced, low-margin food items. So far, American shoppers aren't biting off what the European retailer is serving up.