Mark the date: on 15 June, Lidl will open its first American store. In charge is someone who earned his stripes in Belgium and the Netherlands, but the main question is whether Ahold Delhaize should fear the German discounter’s arrival?
The American journalists were introduced to the discounter’s local management and were briefed about their approach and ambition in the United States. An introductory period of two years will bring its first twenty American stores in North Carolina, South Carolina and Virginia. Within the year, another eighty will open their doors in states like Ohio and Texas.
Several insiders says Lidl will have more than 330 stores by 2020, which would be a rather insignificant amount compared to its competitors Kroger, Walmart and Aldi (with 1,600 stores). Even Ahold Delhaize, which is active in the same regions, is much larger, but Lidl’s arrival has already had its impact: it announced its pricing would be up to 50 % lower than that of its competitors, which immediately sparked a price war. Walmart is allegedly pressuring its suppliers so that it can go 15 % lower than its rivals’ pricing and Aldi is even targeting a 21 % difference.
War of the titans
The price war is also a bad thing for Ahold Delhaize’s margins, although its most recent quarterly results proved it was capable of holding its own. The merger company’s synergies in the United States are paying off and that is an encouraging sign. A strategy focused on cost control, differentiation and eCommerce should give the company plenty of ammunition to fight back. Analysts are wary though: this is a war of the titans.
In that sense, Lidl’s message is clear: consumers no longer need to compromise between pricing or quality or that it would take a lot of time to shop at advantageous prices, which plenty of people find very recognizable. “People want good quality at good prices and they do not want to spend an entire day in the store, because they want to move on with their life. That is our strength”, CEO Brendan Proctor points to the retailer’s enormous adaptability. He previously worked for Lidl Austria and Ireland.
A remarkable fact is that his lieutenant is called Boudewijn Tiktak, the former Lidl Netherlands’ purchase manager and commercial director for Lidl Belgium and Luxembourg. He is the current Chief Commercial Officer and he emphasized the European quality of Lidl’s product range, even though 85 % of it is bought in the United States. It will have Black Angus beef, MSC-labeled fish, freshly baked bread, fair trade chocolate, bio products, …. Everything is also part of Lidl’s Lidl Love it quality assurance: if you are not satisfied, you get your money back.
The American stores will average about 1,800 sqm, which is larger than the average European store but still small compared to other American stores. They will be open every day, from 8h until 21h, with 90 % private labels. Unlike Europe, the US’ private label industry is not that developed yet, which also differentiates Lidl from the other chains. In that sense, Lidl is an innovator, using the hashtag #ReThinkGrocery. Its social media accounts are ready. Its competitors too. This should be interesting!