“Aldi was sort of the first mover in this position of having an assortment that is mostly private brands [and] having low prices that are just head and shoulders lower than everybody else -- that gave them a first-mover advantage. Lidl has come in not as a copycat necessarily, but that core competency of really low prices and primarily private brand assortment is something Aldi was already doing, so harder for Lidl to stand out [and] seem like something new and fresh.”
Aldi’s presence in the US solidifies, as Lidl is just getting started
In Dunnhumby’s report on Aldi and Lidl, Kahner outlines how the two German retailers are making their presence known in the US, with Aldi taking the lead now due to its established base and overall growth. While the two companies have had a bigger rivalry in European markets, “Aldi has been here 40-plus years, and Lidl is really just getting started in the US,” he added.
“One thing we've seen from Aldi is among the more established retailers in the US, which Aldi is and Lidl isn't quite. Aldi is growing faster than all of them in the last few years, including Costco, another retailer that has made headlines and has good value for customers, and pretty much any other retailer you can think of.”
In addition, Aldi has risen to the 13th largest grocery chain and commands a loyal fan base. In terms of its US business, Aldi has about $27b annual sales, which accounts for a 2.1% share of the grocery retail market, compared to 1.5% for Stop & Shop, 2.4% for Dollar General, and 2.7% in Target, according to Edge by Ascential. Additionally, 63% of Aldi consumers said that they would be sad if their store closed, as opposed to 45% of Lidl shoppers, according to a survey of consumers from Dunnhumby.
Despite Aldi’s established foothold in the US, Lidl’s growth is “coming from adding new stores at a faster rate than others have just because they are newer, so they've had more room to add new stores,” Kahner said. In terms of its market position, Lidl is currently 45th in the grocery retail market with 0.3% of the market share or about $4.5bn in sales.
A big part of what makes each retailer unique comes down to product assortment, Kahner explained. Aldi has taken a more limited assortment of private label products, whereas Lidl offers a wider selection of products, he said. However, Aldi and Lidl shoppers alike say they can’t do all their shopping from the respected stores, according to Dunnhumby data.
“One thing that Aldi has done well, too, is just they've stuck closer to the formula that worked for them in Germany in the sense of a very limited assortment without much else to the experience besides great prices, limited assortment, and that has helped them seem really different from a lot of other options in the US. Whereas Lidl’s assortment is probably twice the size of Aldi’s, so they're more of this cross between something that's familiar like an everyday supermarket and a discounter.”
Can Lidl find openings, leverage loyalty programs to beat Aldi?
Lidl has several advantages that can help it gain market share, Kahner said. For one, Lidl has driven great adoption of its digital app, which can provide the necessary insight to growing its business, he added.
“If Lidl can really get the personalization of their experience and their assortment and the savings that they offer customers right and really dial that in and use that data they've been collecting on customers the last five or six years to give customers more benefits than I think that could help them.”
Another area Lidl might invest some of its time and money is expanding in areas where Aldi might not have a presence, yet, Kahner said. Given that “Lidl’s pockets are almost as deep as Aldi’s” from a global perspective, they can make acquisitions to gain a foothold in a specific region.
“If [Lidl is] stepping back and evaluating their expansion strategy, there's still a lot of undiscovered territory in the west where Aldi isn't. So, I would wonder is Lidl going to move more into the west, so they could occupy that territory and just not have to go head-to-head with Aldi, or are they going to look to acquire some stores in the US as Aldi has in markets where they don't have as much of a presence.”
Aldi’s push into Florida, remodel efforts pay off
While Lidl is looking to take market share from Aldi, Aldi is looking to cut into Publix’s presence, especially in Florida, with its acquisition of regional grocer Winn-Dixie, Kahner said. This acquisition will double Aldi’s presence in the state, which will help it in its fight against Publix, he added.
“The acquisition in Florida was interesting because Florida was already [Aldi’s] most populous state as far as store count. But Publix is such a behemoth there with the density of their stores and how many stores they have that just competing with Publix requires an even bigger presence I think than Aldi has today to compete.”
In addition to adding new stores through new construction and acquisition, Aldi has invested in remodeling its store layout to focus around freshness, natural, and organic, growing areas of interest for consumers, Kahner said.
“The position that Aldi has today in the minds of customers is the quality perceptions on their assortment they're not above the market average, but they're not as far below the market average as a lot of other harder discounters,” he said. “I think that is reflected [in] the remodel and their move into more natural and organics and emphasizing fresh more, so I think they're getting credit for it for sure.”