Lidl's offer is resonating with Hispanic shoppers
Center store 'not a big driver of Lidl’s impact,' says Catalina study: 'Produce, meat, and seafood attract shoppers to Lidl stores'
A further 33% of the sales declines experienced by local rivals in the 16 weeks after a Lidl store opened, came from seafood, meat, deli, frozen, bakery and tobacco**; while just 7% of lost sales were from shelf stable grocery and general merchandise categories, which typically account for 40% of store sales, according to the study from digital marketing specialist Catalina.
Rivals' sales of dairy foods and health & beauty products, meanwhile, “were not impacted by Lidl during the study period,” possibly driven by competitive promotions, limited choices in these categories at Lidl, and high loyalty toward health and beauty care name brands, speculated Catalina, which examined sales and shopper behavior in competitor stores during a 16-week period before and after Lidl store openings in three states.
“The huge impact on these three departments [produce, beer, wine] was impressive, given that they account for just 16% of average sales in grocery stores.
“Meanwhile, the center store was impacted far less. Center store is not a big driver of Lidl’s impact. Fresh and low price in produce, meat and seafood attracts shoppers to Lidl stores…”
Lidl's offer has stronger appeal with Hispanic shoppers, younger consumers
As for which shoppers found Lidl’s offer the most compelling, “Sales declines [at rival stores] among Hispanic shoppers were more than twice as high as average. African American shoppers also showed above average declines. Meanwhile, Caucasians and Asian Americans were less impacted than average,” revealed Catalina.
“Younger adults accounted for slightly higher sales losses than average, while seniors 65 and older showed a significantly lower impact.
“Households with children accounted for higher losses than households without. Larger households with five or more people accounted for almost 25% greater losses than households with four or fewer people.”
Income, however, was not a factor, with sales declines evenly spread across seven different income groups, it revealed.
Name brands less impacted than private label at rival stores
So which kinds of products suffered at rival stores?
Perhaps not unexpectedly, private label products at competitor stores were the hardest hit given Lidl’s high quality but low prices, said Catalina. However, branded products were less impacted:
“The study found that name brand products at competing grocers delivered a significant competitive advantage against Lidl’s heavy emphasis on private label. In fact, the percentage of sales declines among name brands was roughly 3.4 times less than for private label products at competing grocery stores.”
The Lidl effect
So overall, how would Catalina characterize the 'Lidl effect?'
While Lidl had a significant impact on competing supermarkets during the first two months after its openings, that impact “declined precipitously by the third month as many trial Lidl shoppers returned to their past shopping behavior,” claimed Catalina.
“For nearby incumbent stores, average sales were down almost 7% during the first month. However, by the fourth month, sales were down less than 2% compared to what they were prior to a Lidl opening.”
*In the report, ‘Defending supermarket share when Lidl comes to town,’ Catalina looked at the impact of 30 Lidl store openings in 2017 on 83 existing supermarkets representing eight different retail chains in three states: Virginia, North Carolina and South Carolina. The supermarkets studied were all within three miles of one of the new Lidl stores.
Catalina examined sales and shopper behavior in those stores during a 16-week period immediately before the Lidl openings. Using a Time Series Regression Forecast Model, the study then compared expected sales at those stores had there been no Lidl opening with actual sales during the 16 weeks following the openings.
**Lidl stores do not sell tobacco, so the tobacco sales from the rival stores after Lidl opened did not go to Lidl, explained Catalina, but likely reflect fewer trips to the stores in question.
How should rivals respond to Lidl? “Big losses experienced in produce, beer and wine suggest that special promotions in these departments would be a potent defensive strategy," says Catalina.
“Targeting heavy buyers, Hispanics, younger shoppers and larger families with personalized pricing and promotional strategies will help blunt the impact on these groups.
“Name brand products held up well against Lidl’s private label offerings, and represent a significant competitive advantage for other supermarkets. Retailers should work with their manufacturer partners on an ongoing basis, leveraging name brand promotions and shopper marketing strategies to leverage that edge.”