Lidl’s First Day of Operation in the U.S.: Our Take

16 Jun 2017

By:

• Mike Paglia

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The wait is over. Lidl is finally open for business on U.S. soil, with 10 stores opening yesterday in Virginia, North Carolina, and South Carolina. I had the opportunity to visit two of those stores (Greenville, S.C., and Spartanburg, S.C.), navigate the crowds, and get a first-person view of the much-hyped retailer. My head is still spinning with all I saw, but here are some quick first impressions:

1.  “Surprise” is a huge part of the offer. Roughly 20% of the center store is devoted to “Lidl Surprises,” an array of unexpected nonfood items, such as diaper bags and dress shoes (Figure 1). These items are available in limited quantities and rotated weekly with the aim of driving a treasure hunt mentality. Once they’re gone, they’re gone. Judging by the crowds searching through the bins, folks were definitely intrigued. However, given Lidl’s positioning as a food retailer, these nonfood specials could potentially be a distraction for some shoppers. I couldn’t help but wonder if there’s a risk for trip mission confusion. That said, since nonfood specials have been central to its offer throughout Europe, Lidl is likely well-aware of the need to maintain offer clarity.

Figure 1. Lidl Surprises

Source: Kantar Retail

2.  Private label raises the game. Consistent with expectations, private label comprises about 90% of the overall assortment (which includes about 3,600 SKUs, according to the Lidl app). There is some variability across categories, however. For example, I counted only a handful of branded items in breakfast cereal, whereas supplier brands had a greater presence in personal care. Regardless of the category, private label is high (Figure 2). Lidl is clearly working hard to set the parameters of the value proposition for shoppers. 

Figure 2. Lidl’s “Preferred Selection” Line

Source: Kantar Retail

3. Pricing is highly competitive. This could be an understatement. We’ll have a more precise view after we complete our pricing analysis, but when you see bananas for 44 cents per pound and baby food pouches for 79 cents, it’s clear the retailer wants to live up to CEO Brendan Proctor’s assertion that Lidl will “beat the best prices in the market” (Figure 3). 

Figure 3. Baby Food Pouches for 79 Cents

Source: Kantar Retail

 4. Simplicity is a guiding principle. The stores are designed for an easy and stress-free shopping experience. That means simplicity permeates everywhere. For example:

• Color-coded shelf-ready packaging (e.g., green for organic) that aids item selection
• Easy-to-understand promotions with concise explanations (Figure 4)
• Concise but informative signage conveying the brand promise

Figure 4. Lidl’s “Fresh 5” Promotion for Meat and Produce

Source: Kantar Retail

Simplicity doesn’t mean easy. It entails a lot of hard work behind the scenes. However, simplicity and efficiency have been central to Lidl’s success across Europe, and the retailer has certainly brought that ethic to the U.S.

5.  Supermarkets are in the crosshairs. The fresh bakery. The perishables. The store size. Most importantly, the midmarket shopper. Make no mistake: Lidl is (and is competing with) conventional big-box supermarkets — and Walmart, for that matter (Figure5). The dollar stores and the upscale retailers may get a glancing blow, but the grocers that lack sufficient differentiation are likely to have a difficult time staying competitive.

Figure 5. Lidl’s Checkout Lanes

Source: Kantar Retail