Wednesday, April 5, 2017

Aldi and Lidl Cause Retail Consternation

Legacy grocery retailers have in large part dismissed, ignored, and discounted customer migration from their brands to ‘hard discounters’ the ilk of Aldi, Lidl, and WinCo Foods as not our competitors according to Foodservice Solutions® Grocerant Guru® Steven Johnson.  There is only problem with that, which is consumers have not ignored, dismissed, in fact they like the discount pricing on staples and holiday food specialty items. 

While newspapers don’t write much about Aldi, Lidl, or WinCo other than when they open a new store or have a hiring event as they don’t tend to advertise.  Aldi & Lidl carry very few legacy branded food products instead preferring to sell their own private label food at a substantial discount to national branded products creating a competitive pricing platform that has become a key drive for customer adoption according to Johnson. 

Foodservice industry research icon Bill Bishop describes Aldi and Lidl as ‘twins and major disruptors’. In fact Bishop went on to say that Aldi “has more than 1,600 U.S. stores, and Lidl, which plans about 100 stores a year beginning this summer, as “fraternal twins, but not identical ones” with a history of success upsetting traditional shopping markets in Europe. Both brands have strong reputations for price”

Bishop continued saying “We see hard discounters as more than just a new form of competition…In fact, we think they’re going to be a major disruptor and source of change influence on the grocery industry.”

In the case of Aldi and Lidl each understands that the average grocery customer in the United States only buy 100 different items per year from the grocery store.  The fact is consumer just replace the 100 items over and over again all year long.  Aldi & Lidl see no need for a 40,000 sq. ft., 50,000 sq. ft., or 60,000 sq. ft. grocery stores. Thus they each have smaller footprints, less fixed cost, and since they carry few branded food products and more private label products they have higher margins and lower prices for the consumers according to Foodservice Solutions® Grocerant Guru®.

Saving consumers time and money is attractive to consumers and that is the primary reason that Aldi now has over 1,600 stores in the United States and is project to have 2,000 units by the end of 2018.  Lidl is scheduled to open 100 units this year and several hundred more in 2018.
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