Reading Lidl’s planning applications has become somewhat of an obsession over the last few years. The reason We/I do it is, every once in a while, you find a little gem that provides insight into its intentions. A good example is in the UK, whereby Lidl who currently list approximately 2,000 SKUs, now require their planning consents to allow for up to 3,500 lines/SKUs, in order to provide sufficient flexibility to accommodate future growth.
The recent big news coming out of the US is Lidl’s prototype site criteria for expansion. Whilst its plans are very typical for a Lidl store, the most notable aspect is the proposed unit size – 36,000 sq. ft.
Lidl Unit Size in the US
This unit site is easily the largest across Lidl’s 26 markets. As basis for comparison, the maximum unit site in the UK is around 28,000 sq.ft.
Typical Lidl Layout
This begs the question, how big will Lidl’s sales area be in the USA? There are ways of making an “educated” guess. If we look at Lidl’s typical planning applications and take the average, in terms of allocation of space, we get a better understanding of how space is utilized.
Space Utilization in Lidl
Sales for new stores in the UK vary from 8,000 to 19,000 sq. ft. Based on the calculations above, the sales area of Lidl in the US could be over 22,000 sq.ft, thus, further blurring the lines between a discounter and a small supermarket. This is significantly bigger than any Lidl store in Europe, meaning we should expect a new type of Lidl. My initial thoughts are the store will certainly be akin to its Store of the Future concept, currently being rolled out in the UK.
The LOF (Lidl of the Future) format focuses on improving in-store standards for a more pleasant shopping experience - meaning more natural light, wider aisles, revamped category signage, new fixtures and fittings, customer toilets and baby changing facilities, as well as longer checkouts and finally self-checkouts.
Lidl Store of the Future
No doubt we should expect most, if not all, aspects of this offer in the US. However, with significantly more sales area to play with, we can also expect a few surprises or innovations. The crucial thing to understand about Lidl is that any innovation Lidl rolls out in a market is nearly always aimed at neutralizing whatever perceived advantages local retailers have. More often than not this means getting one or two key categories “right.” Portugal offers a great example of this.
Lidl suffered market share wise when the market turned. The reason? Irrespective of income level, perishable quality is too critical to the grocery offer to be sacrificed. Any retailer not good at it can’t capture anything but secondary basket positioning. The Portuguese retailers started retooling their Private Label offer to compete with discounters, when the economy turned. Having already done a good job with perishable quality, the Portuguese economic collapse shopper was faced with a regular store that had their perishable quality and newfound low price point Private label vs Lidl. As a result, traffic dropped significantly as Lidl was seen as an extra, unnecessary trip.
Lidl’s reaction has been fascinating. Its initial step was to improve its fresh and perishables range. This saw it source more from domestic suppliers in Portugal, accompanied by the campaign ‘Compro que é nosso’ (Buy what is ours).
Secondly, Lidl started to experiment with new innovations in a bid to differentiate itself. These include a café area in store as well as concession stands for freshly cooked poultry.
Taking all this in to account, Lidl certainly has the space to trial these types of innovations in the US. Café areas can certainly help it differentiate itself against Aldi. With Deli being a key category in its regions of expansion, Lidl will certainly be looking to showcase a compelling offer to match US standards. Any supermarkets that lack a clearly differentiated value and are perceived as conventional such as Food Lion are therefore under the biggest pressure. What is certain is Lidl will be different in the US. How different, I look forward to finding out.
For more information on How Lidl will look in the US and how disruptive it could be, please join Mike Paglia and Simon Johnstone for the Webinar - Lidl - The International Force Coming to the US .