Lessons learned, Lidl restarts U.S. advance

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The German hard discount grocery retailer Lidl stumbled in its much anticipated U.S. debut two years ago.

The retailer has proven a strong competitor throughout Europe, with a business model based on small stores, a no-frills shopping experience and low low prices, and Lidl had big plans for the U.S. market. After opening nine stores in Virginia, North Carolina and South Carolina in June 2017, the retailer said that it expected to have 20 stores operating in the three states by the end of the summer and as many as 100 stores up and down the East Coast within a year. But after initially drawing big crowds, the stores saw traffic declines, and Lidl responded by dialing back its expansion plans.

That may have prompted some in the supermarket industry to wonder if this was just another example of a successful foreign mass retailer that was unable to adapt its concept to the U.S. market. Carrefour and other French hypermarket operators had proven unable to succeed in America back in the late 1980s, after all, even if they did inspire Walmart to develop the Supercenter format that allowed the former general merchandise retailer to become the nation’s biggest grocer. And Britain’s Tesco failed to conquer the U.S. market in 2007 with its Fresh & Easy Market format, which promised low prices and convenience.

But while a postmortem at Lidl’s German parent company determined that the retailer’s first U.S. stores were too big and had poor locations and too expensive merchandise, the company did not withdraw from the U.S. market. Instead the retailer paused its growth and changed its U.S. management.

In November Lidl agreed to acquire 27 Best Market stores in New York and New Jersey, and then announced a transition process for this year that would involve remodeling and reinvesting in the Best Market stores, and converting them to the Lidl banner. And earlier this month the retailer announced plans to open 25 new stores in Maryland, New Jersey, New York, North Carolina, Pennsylvania, South Carolina and Virginia by spring of 2020. Lidl said it planned to have 100 stores in nine states by the end of next year.

“These new stores are part of the next steps in our U.S. expansion,” Lidl U.S. chief executive officer Johannes Fieber said in announcing the move.

The upshot will undoubtably be increased pressure on supermarket competitors on the East Coast. Rivals responded to the first wave of Lidl stores by lowering their prices dramatically. Expect more of the same this time.


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