Aldi, the discount grocery store that we in the U.S. at first doubted but slowly grew to love, may soon face stiff competition from one of its most familiar competitors.
Lidl (pronounced lee-dil), like Aldi, originated in Germany and is set to open one of its very first American stores on June 15th, giving Aldi a run for its customers when it comes to discount grocery store chains.
In 2011, Aldi faced challenges when the store they opened in New York had many customers perplexed about how it operated: The New York Times reported the store had consumers complaining or confused about the cart system, why it didn’t have a certain product in stock when it was in season, and the fact that most of what it carried was what someone (ironically) labeled a “no-brand.”
But Aldi has come a long way in educating its customer base, and they have become so successful in the U.S. that they’ve opened 1,500 stores (that’s more than most well-known supermarket chains, besides the grocer Kroger/Safeway). And, as of 2015, they rank 8th as one of the largest retailers globally, outperforming both Minneapolis-based Target, and Home Depot.
The “no-brand” private labels of the grocery world have become quite popular as well. So popular, in fact, big name products have had problems performing against them and are constantly searching for new ways to spend their marketing dollars to try to catch up.
And, while Aldi is a discount store, it is not the typical dusty, banged up, old produce type of discount store: For those unfamiliar, Aldi has become a household favorite among those who demand high-quality groceries at a fair cost.
How has Aldi been able to serve up such low prices?
Aldi’s cheaper prices do not come without a loss of convenience. To ensure Aldi can provide rock bottom prices they:
- Charge for paper and plastic bags
- Require a $.25 cent deposit on carts to avoid hiring a cart attendant
- Leave large units of product inside boxes to save on labor
- Keep shopping hours to a minimum (typically 9-9pm or 9-7pm)
- Print multiple barcodes on products so cashiers can scan them quickly
- Keep small produce items (like fruit) in bulk
- Primarily sell only 1 brand (usually private labels) of each item to make things easy and cut back on inventory
- Do not take checks to keep processes faster
- Do not do loyalty programs or much or any marketing
All of which leave the customer with roughly 50% more savings in their pocket. Unless, of course they use coupons, in which case a person could save more at another store (with more time invested searching for deals), as Aldi does not accept coupons.
Coupons or not, Minnesota has embraced Aldi: Nearly 50 stores operate across the state, 20 of which are located in the Twin Cities (and I’m sure we’d gladly welcome 10,000 more, one for each lake, if we could). But the Midwest, as a whole, has been lucky when it comes to Aldi as the first U.S. location opened in neighboring Iowa back in 1976 and has been going strong ever since.
Lidl has some serious discount grocery pull in Europe. With its owner being Germany’s third richest man, and its cautious and slow moving approach (they were supposed to open in the U.S. two years ago) to ensure it doesn’t make any mistakes, Lidl could be seen as a threat to any retailer.
To give you a feel for how large Lidl is in Europe: They own roughly 10,000 locations, while our biggest grocer in the U.S. owns around 2,800.
And, to show people they aren’t fooling around, they’ve even won two awards: one for Global Brand Simplicity, showing they are transparent, honest and value their customers, and one for Grocer of the Year, The Grocer Gold Award, showing they are consistent with improving their growth and financial strategy (as we told you, they mean business).
But they also mix things up and do something we’re not used to here in the U.S. They won’t just be offering groceries, they’ll also be selling wine that boasts a classification (think Trader Joe’s wine write-ups), and a clothing line designed by Heidi Klum (think Aldi meets Target). And while they’re selling you both a whole turkey and comfy, fashionable pants, you’ll also want to make sure you pick up something fresh from the bakery before you head home, because yes, there will be a bakery and deli there as well.
And with a motto like: “Lidl surprises,” who knows what else they’ll bring with them.
So what does Aldi plan to do?
The discount grocer has plans to open 900 more locations by 2022 to try to leverage more of a brand presence while Lidl becomes familiar with its new territory. Trader Joe’s (Aldi’s sister company) has been quiet.
What does all of this mean for consumers or retailers?
With many retail stores folding because of competition (both online and brick and mortar) it means some grocers and brands will have to adapt to keep up with the likes of both Aldi and Lidl. While some will be hard pressed to drop prices, others may be unable to compete and eventually wind up bankrupt. We may start to see some of the longest standing grocers or brands of our lifetime run into trouble or even go out of business.