U.S. Showdown

High Noon for Lidl and Aldi

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Lidl's coming to town.
  • Why it matters

    Why it matters

    Aldi and Lidl’s new competition in the United States will cost each millions of dollars, and could affect the outcome of their rivalry in Germany.

  • Facts

    Facts

    • Aldi and Lidl are testing new types of discount stores that look more upmarket but still sell a limited range of products at rock-bottom prices.
    • Lidl is preparing to launch in the U.S. in 2018 to challenge Aldi there.
    • Both chains are aggressively expanding abroad, but are avoiding emerging market economies where poor infrastructure doesn’t support high-volume shops.
  • Audio

    Audio

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The global rivalry between German discount supermarket chains Lidl and Aldi is going stateside.

Lidl will expand into the United States, taking on Aldi and its chain of Trader Joe’s specialty stores, which it operates there under its Aldi Süd (Aldi South) division.

“It’s a big deal for us; it’s a step into a completely new market that offers sufficient growth potential for the coming years,” Lidl Chief Executive Sven Seidel told Handelsblatt. “Our U.S. project has brought a bit of start-up feeling into the whole company. The team on the ground is interpreting the Lidl concept and adapting it to the local requirements.”

With more than 10,000 stores and revenue of close to €63 billion, Lidl is already Europe’s largest discount retailer. Worldwide, the Schwarz group with its flagship Lidl and its smaller subsidiary warehouse discounter Kaufland is the third-biggest food retailer, behind Wal-Mart and Carrefour of France.

Aldi is determined to make Lidl’s U.S. launch as difficult as possible. When Lidl announced plans to enter America, Aldi quickly responded with a drive to open 650 more U.S. stores, increasing its presence there to 2,000 sites.

In its first foray to America’s West Coast, Aldi will open new stores next year in southern California. “That’s an important market with really great potential for us,” said Jason Hart, Aldi Süd’s U.S. chief.

Mr. Planer, the retail analyst, said the U.S offers huge potential for Lidl despite Aldi’s head start. “The U.S. is a vast market; there’s definitely room there,” he said — especially for German discounters.

The move is part of a wider shake up of German discounters. Its pile ’em high and sell ’em cheap model has worked well in Germany, but overseas shoppers are more choosy.

At two outlets in Verona, Italy, Lidl has built stores with high ceilings, wide aisles, a huge glass facade and walls in warm brown tones to convey a friendly, welcoming atmosphere. The wine and the vegetables are presented in appealing wooden crates and the store smells of fresh bread.

There are customer toilets and diaper-changing facilities, something uncommon in Germany.

True, the range of goods is still far narrower than classic supermarket chains. Rewe or Edeka, for example, offer 20,000 products, compared with Lidl’s maximum of 2,500. But in terms of presentation, the line between discount and conventional grocery chains is becoming blurred.

Lidl will use a similar format in the United States where it’s investing more than €200 million, or $215 million, to open 50 stores by the start of 2018.

Aldi has also gone up market.

It launched “Project frisch,” or “Project Fresh” at four stores on Australia’s East Coast. Here too, wooden designs have replaced the crates and cardboard boxes that used to characterise discount shopping.

There’s a big selection of fruit and vegetables next to the entrance, just as in conventional supermarkets. In addition to the 900 basic goods for sale, there are selected gourmet products on the shelves.

In addition to expanding internationally, Lidl wants to safeguard its existing markets by investing in its existing stores to fend off competitors like Aldi.

Lidl is spending a three-digit million euro sum to modernize and enlarge its stores in France. In Britain, it’s looking for sites for hundreds of new stores. It even wants to open stores in wealthy London neighborhoods such as Westminster, Kensington and Chelsea.

It plans to spend €1 billion by 2020 to expand its presence in Italy – partly because its eternal competitor Aldi announced plans to enter Italy.

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