Oliver Wyman conducted three independent surveys over the course of a year polling 3,600 consumers in the states where Lidl operates: North Carolina, South Carolina, Virginia, Delaware, New Jersey, and Georgia. Of these, 600 had shopped at Lidl already, and were asked about their experiences in detail.
The sample of 600 Lidl shoppers comprised 52% female consumers (48% male), 81% with a household income between $25,000 and $150,000 and 35% millennials (ages 18-34).
“Lidl is winning over the next generation of consumers in a meaningful way,” Tanja Ebner, principal in Oliver Wyman’s retail and consumer goods practice, claimed during a press conference call
The survey showed that around two-thirds of younger shoppers shop at Lidl more than twice a month and are also buying bigger baskets than older generations.
Lidl is still managing to drum up broad market appeal, Ebner pointed out.
The survey suggested that Lidl is stealing shoppers from incumbent grocers as 40% of consumers surveyed who said they are loyal to supermarkets are now shopping at Lidl more than twice a month.
“In our conversations with supermarket executives, they are surprised to learn that the number is this high,” she said.
Last month, Johannes Fieber was appointed as president and CEO of Lidl US operations, assuming responsibility over the coming months.
The attraction of Lidl
The survey’s results showed that consumers were testing the waters with Lidl in the beginning with 58% of shoppers spending more than $20 in 2017. Now 84% of shoppers surveyed they are spending more than $20 per trip, on par with spending at a national grocer (85%).
Consumers are choosing Lidl for very similar reasons that traditional supermarkets claims as strengths including cost savings as well as the assortment and quality of products, according to Oliver Wyman.
More than two-thirds of shoppers in the survey believe prices at other grocery stores have dropped since Lidl’s arrival.
Traditional supermarkets in the US use increased assortment as a common lever to drive sales but they do so at higher operation costs including hired store labor, said George Faigen, partner in the Retail and Consumer Goods practice of Oliver Wyman.
“Incumbent grocers should be quite worried that Lidl is viewed by consumers as being on par in the assortment area,” Faigan said.
More than a quarter of millennial shoppers and 46% of shoppers over the age of 35 cited ‘good prices’ as the primary reason for shopping at Lidl followed by the store’s ‘good quality products’ (24% of millennials vs 13% of 35+ year olds).
“While it’s not surprising that 28% said that the primary reason was good prices, it is actually surprising that 24% said that for good quality products,” Ebner said.
“Remember that 90% of Lidl’s products are private brands which means these consumers have tried and preferred Lidl’s brands over nationally branded products” – a hurdle in the US market where there has been traditionally a lower acceptance of private label compared to Lidl's home market of Europe, Ebner added.
Should slower store footprint growth be a concern?
Lidl currently operates around 50 stores in six US states, half of the company’s original 100-store target for 2018, suggesting that it may be re-evaluating its US market strategy where it made a departure from its European business model.
Lidl US stores are double that of their European counterparts in square footage (20,000 vs 10,000 square feet) and product range (up to 4,000 SKUs vs 1,000-1,500).
However, Lidl announced publicly that for its next phase of store openings it would launch smaller formats and enter additional states including New York, Maryland, and Pennsylvania.
“The buildout schedule for companies like Lidl is based on a long term view,” Faigen said.
“I see them as an agile company that finds a way to continually match themselves to the needs of the consumer.”