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A first look at Lidl

Shopper focus and product flexibility driving Lidl’s U.S.

My grandfather, a passionate grocer for more than 30 years, had two major predilections when it came to running stores. He demanded that all floors, walls and windows be spotless, and that there was the right mix of natural and artificial light to highlight the quality of the products being sold without blinding the shopper. If the recently opened stores I visited in Virginia are any indication, he would have loved Lidl.

The German discount grocer, known in Europe for pricing its products up to 50% below the competition, is aggressively bringing its concept to North America with a distinct twist. Like its European counterparts, Lidl’s store brands will account for 90% of the retailer’s products in the U.S. locations. Unlike many of the stores in Europe, however, the U.S. outlets are less confined and much brighter. The front entrances seem to arc skyward, giving them an almost church-like feel, plus plenty of windows adjacent to the checkouts and over the sides of the stores let in copious amounts of sunlight.

The Lidl stores in the United States are about 20,000-sq.-ft., which is one-third larger than the retailer’s biggest stores
in Germany and the United Kingdom, but less than half the size of most of its full-line supermarket competitors. This smaller footprint is designed to take advantage of the industry trend toward convenience and quick customer response and was validated by a series of focus groups the retailer conducted prior to its U.S. debut.

The product mix at the newest Lidl stores is 90% store brands and 10% national brands, which include several leading centre-store lines such as Tide and Coca-Cola, as well as more limited frozen offerings. The Lidl private label lines include a standard range covering most subcategories, plus the premium Preferred Selection, a curated variety of fresh and frozen proteins as well as dry grocery items.

In the fresh areas, the stores feature local produce like blueberries and eggplant from eastern North Carolina and lettuce from northern Virginia that is merchandised in the original packaging. The dairy/deli area is almost entirely private label and includes a respectable selection for each subcategory. There are three free-standing cases of proteins, with about 20 SKUs each of fish (fresh and frozen), meat (mostly beef, but also a few lamb and pork selections) and chicken. Finally, there is a fresh bake unit that bakes products throughout the day: doughnuts, muffins, pizza breads, pretzels and baguettes.

The traditional centre-store areas will be familiar to most shoppers; altogether, there are six wide aisles of packaged food items, along with aisles for pet food, household goods, and health- and beauty-care items. There are several organic and gluten-free options across the food categories and there are specials on almost every endcap. The beer and wine departments are comprehensive, carrying any selection a shopper could want.

The stores also carry limited-time general merchandise items in a section called “Lidl Surprises” offering items as far-ranging as power tools, fitness gear, apparel, appliances, toys and furniture. There were croquet and badminton sets available during the opening week of the Richmond, Va., stores in late July, as well as juice squeezers, shower curtains and a wide variety of back-to-school items.

While the current product assortment has been thoroughly scrutinized to cater to shopper preferences in each market, the company’s leadership is quick to note products will continue to be added and deleted to optimize the assortment.

“We are going to be very flexible with the product mix, so what you see in the stores today could change as we adapt to our shoppers' needs and wants,” explains Brendan Proctor, president and chief executive officer of Lidl U.S., while at one of the Richmond grand openings. Proctor added that the marketing approach is based on making shopping less complex and less expensive without sacrificing quality or choice.

Proctor, an Irishman who has racked up retail experience at home and on the continent, also says the company is sourcing a variety of products both locally and within North America. The deciding factors for these supply relationships are price and quality.

The nine stores in Virginia join 12 others in North and South Carolina as the first of as many as 100 the retailer plans to open along the East Coast by the end of the year.

Analysts are estimating the company will have more than 300 stores in the United States by 2020.

Proctor shared some of the retailing philosophies Lidl is basing the concept on, many of which come from the retailer’s learnings in Europe. These include the confluence of lower prices and a less complex shopping experience, as well as creating a sense of trust that a supermarket operator needs to have with customers. To acclimate managers to the Lidl approach, Proctor sent several of them to train in Europe to see the concept in action.

“Really the key to the store is curating a limited assortment of high-quality products, providing the best available prices and having a team that has been trained to be very engaged with the shoppers,” he says.

My grandfather used to quip that his job as a retailer was to make it as easy as possible for shoppers to buy from his store and as hard as possible to buy from his competitors. Lidl appears to have taken this mantra to heart.

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