The German discount supermarket chains Aldi and Lidl appear to be Britain’s fastest growing supermarkets, with Aldi increasing its market share to 7%, while Lidl’s share going to 5.2%.
As a result, Aldi is currently Britain’s fifth biggest supermarket, having overtaken the Co-op at the beginning of this year, and Lidl coming seventh, after overtaking Waitrose last month.
The combined market share of the German discounters has grown nearly 80% in the last 4 years and moreover, both are announcing plans on doubling the number of their stores in the UK in the next 5 years.
Furthermore, looking at the latest data from the retail researcher Kantar Worldpanel, the sales of the UK’s big four supermarkets, known as the ‘Big Four’, grew by only around 2.5% for the period mid February – mid August this year, or to be precise: Tesco‘s sales grew by 3.0%, Sainsbury’s – by 2.0%, Asda‘s – by 1.4%, and Morrisons‘ by 2.6%; compared to Lidl increasing sales by 18.9% and Aldi – by 17,2% for the same period, collectively attracting almost two-thirds of the British consumers and turning into the preferred supermarket chains by families in England.
While the Brexit vote, could be largely considered as a contributor to the fastest rate of growth of Aldi and Lidl, there are plenty other reasons behind the success of the German retailers.
The discounter giants boast long years of success across Europe and at home – considering that the German market, with its low prices and high quality, is notoriously declared as ‘the hardest one for retailers’; where even Walmart failed, bitterly finding out that its formula and localisation efforts do not effectively fit every culture.
Opposed to the American retail corporation’s failure on the German market, both Aldi and Lidl are fairly successful in their North American expansions, with Aldi planning to add new 900 stores to their existing chain of 1,600 locations and Lidl, having just entered the US market, with plans announced for an expansion of 100 locations within the coming year and promises for prices of up to 50% lower than those of comparable products at other grocers.
Both discounters invest heavily in market research and consumer behaviour, along with managing broad localisation strategies focused on the socio-cultural specifics of a given market and its consumers, with the main ingredients of their formula for success – relatively small stores with a limited selection, low prices, and nearly 90% own-label products.
And it is exactly the broad selection of private-label products, providing their main competitive advantage, to mostly differentiate the European and American markets, where the latter still largely views own-labels as choices of low quality for the poor, whereas European consumers – partly thanks to Lidl’s collaborations with celebrities like Paris Hilton, Michelin star chef Kevin Love, and Heidi Klum – tend to view the discounters’ merchandise as ‘quality products at affordable prices.’
Aldi’s own recent collaborations and marketing campaigns have also played a big role to push its quality and to positively impact consumer perceptions of the brand.
And when we add the own-labels of award-winning wines and premium food (just to name lobster and caviar) to the celebrities advocating for the quality and the image of the discounters’ products, Aldi and Lidl are naturally expected to put even more pressure on the Big Four UK supermarket chains, and not for the sole argument of selling cheaper.
Aldi and Lidl are testament to the international success that can be achieved when marketing and localisation strategies are well aligned and at the core of a brand’s business model.
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