NEW YORK — Lidl failed to maintain early gains in market share following its U.S. launch last year, according to a new report from Catalina.
The report examined the competitive impact of Lidl’s first 30 U.S. stores, which began opening in June 2017 in Virginia, North Carolina and South Carolina.
An analysis of data from 83 incumbent supermarkets representing eight retail chains found that those stores lost nearly 7% of overall sales in the month following the arrival of a nearby Lidl outlet. But the impact declined rapidly, falling to less than 2% of sales by the fourth month, Catalina said in its report, “Defending Supermarket Share When Lidl Comes to Town.”
The study analyzed sales data over 16 weeks from the opening of a Lidl store. Incumbent stores lost 4.3% of sales over that period, on a 3.6% decline in trips and a 5% dip in the number of shoppers. Among the report’s other findings:
• Three departments — produce, beer and wine — accounted for 60% of the incumbents’ total sales decline, even though those departments account for just 16% of incumbent store sales.
• The center store accounted for 7% of total losses, although shelf staples and other general merchandise represented about 40% of the stores’ sales.
• Private label products represented 58% of lost sales for incumbent stores, although private label accounted for 28% of overall sales.
• Name brands represented 42% of the sales lost to a Lidl store, although they accounted for 71% of incumbent store sales.
• Larger households, defined as those with five or more individuals, shifted more of their shopping to a Lidl store during the study period.
• Younger shoppers were some-
what more likely to shift spending to a Lidl store, while customers age 65 and older were less likely to do so.
• Hispanics shifted 9.2% of their grocery spending away from incumbent stores, significantly above the 4.3% average in the 16-week period. African-American shoppers shifted 5.4% of their dollars away from incumbent stores. For Caucasians, the shift was 3.7%; for Asian-Americans, 3.3%.
“This study demonstrates the importance of shopper analytics in helping retailers keep pace with new competitive threats and changing shopper behavior,” said Tom Corley, Catalina’s chief global retail officer and president of U.S. retail. “Retailers need to pay close attention to how new competitors are impacting their shoppers and respond with the right pricing and promotions strategies to protect and grow share.”
Lidl, based in Neckarsulm, Germany, is part of the Schwarz Group, Europe’s largest retailer, with about 10,000 stores in 26 countries. The company located its U.S. headquarters in Virginia’s Arlington County in 2015 and set about acquiring a real estate portfolio, mostly in Eastern states, designing stores and steering the projects through local planning and zoning commissions.
The U.S. division of Lidl vowed to sell products at prices up to 50% lower than other retailers by deleting brands as a shopping variable and focusing the entire shopping experience on an aggregation of cost savings.
Lidl’s entrance into the United States prompted rival grocers to lower prices on key staples by as much as 55% at stores in the vicinity of the Lidl outlets, according to a study released earlier this year by the University of North Carolina Kenan-Flagler Business School. The study was led by Katrijn Gielens, an associate professor of marketing, and was commissioned by Lidl US.
Gielens analyzed prices in six markets where Lidl operates and six control markets in which Lidl was not present in Virginia, North Carolina and South Carolina. She looked at prices for a broad basket of 48 grocery items, including dairy, meat, produce and canned and frozen goods, which were collected through store visits. In markets surveyed where Lidl was present, retailers on average set prices 25% above Lidl prices.
“The level of competitive pressure Lidl is exerting on leading retailers to drop their prices in these markets is unprecedented,” Gielens said in a statement “In fact, the competitive price-cutting effect of Lidl’s entry in a market is more than three times stronger than the effect of Walmart’s entry in a new market reported by previous academic work.”
But industry analysts judged Lidl’s U.S. rollout to be hampered by such problems as an overemphasis on nonfood products, questionable real estate decisions and stores that are too big and too costly to operate. In January, German business newspaper Handelsblatt reported that Lidl was working to incorporate smaller formats into its U.S. plans, and that projects under way in Virginia, New Jersey, Ohio and Pennsylvania had been halted or abandoned.
In May, Lidl US named Johannes Fieber its president and chief executive officer, replacing Brendan Proctor.