Is Lidl still a major threat for American grocers?

In 2016, with the Great Recession well in the rear view, retailers were in various stages of pondering dramatic changes to combat Amazon, which, amid growth in its marketplace, fulfillment network and brick-and-mortar operations, that year staged its second record-breaking Prime Day. Walmart in particular seemed to have had enough. Hampered by neglected stores and lackluster e-commerce, the retail giant made a dramatic summertime play that year, with the acquisition of e-commerce startup and Amazon agitator Jet.com.

But Amazon wasn’t the only shark in the water; a fresh challenge would soon cross the Atlantic — Lidl.

The German grocer is part of the Schwarz Group conglomerate (Europe’s largest retailer and one of the largest worldwide), which operates some 10,000 stores in 26 countries throughout Europe. Like its German compatriots Aldi and Trader Joe’s, Lidl offers a scaled back grocery selection and bottom-barrel prices. However, the chain stands out with its large stores and assortment of home goods and apparel that is immensely popular in Europe — and a headache for rivals.

The retailer staked its U.S. headquarters in Arlington County, VA in 2015 and, after a busy 2016, began opening doors mid-year last year. “We have opened 48 stores since June,” Will Harwood, Lidl director of communications, told Retail Dive in an email, adding that the company plans to open more stores and sell products at “prices up to 50% lower than other retailers.”

Lidl’s merchandising has elements in common with a few U.S. retailers. Like Target, its apparel is stylish thanks to designer collaborations like with German model Heidi Klum. Her Lidl collection, available as of September in the U.S. and the U.K., last year helped boost U.K. sales of discount apparel overall, according to GlobalData Retail Senior Retail Analyst Molly Johnson-Jones.

Who should be most worried about Lidl’s expansion?

Walmart — dependent on grocery for half its sales and not particularly known for enticing non-grocery offerings — is especially vulnerable to the new competition.

“Given Lidl’s focus on lower cost, it might be the best example of a direct competitor to Walmart that we have seen in a long time,” Matt Sargent, senior vice president of retail at consulting firm Magid, told Retail Dive in an email.

Nevertheless, Walmart, at first, didn’t seem to notice the incursion, apparently preoccupied with its newfound focus on e-commerce. “If I ran Walmart, I would be much more concerned about [Lidl] than about Amazon,” Nick Egelanian, president of retail real estate consulting firm SiteWorks, warned late in 2016 in an email to Retail Dive.

Continue reading on Retail Dive.

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