How To Interrupt Lidl’s Lackluster Performance

How should we read the early signs at Lidl? The German hard discounter opened stores in nine southeast markets in June and at first, everyone flocked to check them out. But in July and August, store visits waned. InMarket data showed that Lidl had dropped from 2.6 percent of share of grocery visits to 1.9 percent. Other hard discounters Aldi and Bi-Lo have held steady at about 2.5 percent and 5.5 percent respectively.

The poor performance was enough to inspire the company to replace the executive overseeing the rollout with Michael Aranda, former CEO of Lidl Spain and a 17-year veteran of Lidl, according to Supermarket News. Quoting a German trade newspaper, SN said CEO Klaus Gehrig made the change because the performance of some of Lidl’s 37 stores has been “‘frighteningly weak,” and that the prescription to fix them was to introduce additional discipline in executing the company’s plan.… Instructions from the headquarters are to be executed without further thinking.’”

Of course, we don’t know what instructions from headquarters might be. Maybe things were sloppy. On the other hand, it’s unusual in this day of being hyper-responsive to customers that all the important decisions would come from another continent.

 

Old Grocery Habits Die Hard

Another issue might be that changing grocery habits requires a really big incentive. Everyone assumed that grocery delivery services like Amazon Fresh would take off immediately but it turned out that some people still like doing their own grocery shopping. People might switch stores as a result of a change in diet. They might even switch for consistent savings. But while early visitors to Lidl’s stores reported bargains on many items, they weren’t necessarily lower than at competitors Aldi and Bi-Lo, both of which have been around much longer. In fact, InMarket’s data seems to show that Lidl’s 2.6 percent share of visits weren’t skimmed from other stores so much as prompted by curiosity. It was more of an outing than a serious reconnaissance trip to see if it was a better place to shop.

 

Savings and a Shopping Schedule

And Lidl has some other novel ways of functioning that might throw shoppers off. For example, their weekly deals don’t go from Thursday to Wednesday as most stores’ do but from Thursday to Sunday and from Monday to Wednesday. That might prompt more store visits but people don’t really want to have to reconfigure their planning when it comes to grocery shopping. If the store draws them in with a great coffee shop or wine bar that’s one thing. Having to come in twice to get store deals is less convenient, rather than more.

 

On-Shelf Availability Concerns?

Also, store flyers and signs advertise “Get them while they last” about so many items it gives the impression of a fire sale. Most U.S. shoppers like the idea that their store will have the items they want on a consistent basis, not that they’re a rare find.

 

Things Are Different Over the Pond

Shopping is different in Europe. American expatriate blogger for The German Way and More wrote that German discount stores often lack in terms of presentation and don’t have the best fruits and vegetables or customer service. That was the experience many shoppers had of Aldi the other German hard discounter that has been in the U.S. since 1976. Lidl’s arrival in the market inspired Aldi to work on being more upscale. And, indeed, Chain Store Age reported that agents from retail auditing firm Field Agent came back with positive reports of their trips to Lidl when it first opened. But it was not Aldi shoppers who changed their shopping habits in June when Lidl opened, but a percentage of the shoppers who usually went to Harris Teeter and some other more traditional American stores. And many of them seem to prefer the experience they’re more familiar with.

Are we Jumping The Gun?

On the other hand, none of these things might be the problem. It might just take shoppers time to incorporate Lidl into their shopping regimen. Between online shopping and Instacart, meal kits and stores revving up their offerings, grocery consumers have gone from people who served meatloaf every Thursday to people for whom each meal is a host of decisions. That’s a lot to contend with. And after all, it’s only been a few months.

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Seth Nagle, Senior Marketing Manager at RW3 Technologies understands the power of innovation but also its limitations. Attending Salve Regina in New England, starting his career in Silicon Valley, and now living in Austin, Texas; Seth provides a unique tech perspective to a complex CPG and Retail Grocery Industry that is in constant disruption.

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