At times when American consumers are spending nearly $800 billion on grocery shopping, the German discount supermarket chain Lidl has just opened its first stores in the United States, with plans announced for an expansion of 100 locations within the next year.
Lidl has been testing the US FMCG market for an year now, and the market is traditionally tough, finding nearly 20 U.S. grocers filing for bankruptcy in the last couple of years and the longest deflationary spiral that has seen food prices drop for an year and a half straight, along with the Amazon Go project and consumers’ turn to grocery shopping online, with online grocery sales foretasted to be a $100 billion business by 2025. Yet, the German discounter has pumped billions into its North American expansion, to add new brick-and-mortar locations to its existing chain of more than 10,000 stores in 27 countries.
In the battle for the low-margin industry, Lidl will go head to head with yet another German discounter – Aldi, operating through 1,600 stores for now over half a century in the North American market, and announcing plans for an investment of $5 billion to open nearly 900 new stores and remodel hundreds of its existing locations across the country.
Both discounters follow a similar formula of low prices, limited selection and heavy use of private labels in their successful chains across Europe. And to answer the needs of its American customers, Lidl’s localisation efforts are focused on a broader selection of healthy eating choices, most notably organic and gluten-free offerings, improved meat and fresh fish selection, heavy advertising of the private labels brands (currently less appealing to the American audience), along with increased selection of national brands and packaged prepared foods, and the addition of free samples of beverages and fresh baked goods from in-house bakeries at each store’s entrance, following Costco‘s successful approach and consumer expectations, defined by the president and CEO of Lidl U.S., Brendan Proctor, as: “When customers shop at Lidl, they will experience less complexity, lower prices, better choices and greater confidence.”
The tactic of own products, naturally, offers bigger control over inventory and leads to lower prices and higher margins and Lidl is expected to enlarge the offering of its mix of private-label brand names to 90% of the products in its North American stores.
Yet, it was one of Lidl‘s own brands to put the company under fire in the last weeks, as a wave of consumer disapproval spread across social media in Europe when the packages of discounter’s range of Greek-style food Eridanous featured pictures of the well known churches on the island of Santorini with crosses removed from their blue domes as a move to maintain religious neutrality.
The notoriously unsuccessful Greek week marketing campaign was internationally accepted as disrespectful for cultural diversity, and while its direct impact on Lidl’s future sales and reputation in the North American market is yet to be determined, it could be largely viewed as a live example of the damages a tiny localisation mistake could potentially cost a giant brand.
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