Aldi, Lidl growth to spark industry change

Bishop described Aldi, which already has more than 1,600 U.S. stores, and Lidl, which plans about 100 stores a year beginning this summer, as “fraternal twins, but not identical ones” with a history of success upsetting traditional shopping markets in Europe. Both brands have strong reputations for price, tend to be well-liked by their shoppers and although somewhat limited by the size and selections and pizzazz in their stores “they are working feverishly to overcome the selection and experience limitations so that they can compete more directly with mainline food retailers.”

These changes — which include Aldi’s recent announcement that it would renovate 1,500 of its stores and Lidl’s pursuit of a larger version of its successful European model for U.S. rollout — is outgrowing the hard discount model that used to define them, Bishop said. Their new format, he said was “TBD.”

Bolton noted the evolution includes leaving behind a previous focus on everyday low prices for a kind of hybrid promotional strategy, noting that sales fliers have grown in recent years from four to 16 pages, and cast an eye toward creating urgency through weekend deals, seasonal offerings and “while they last” promotions.

Aldi and Lidl also manage assortment differently than their conventional competitors, overcoming limited selection by constantly “churning” inventories and introducing new products that earn their way into the permanent assortment on sales, Bishop said.

The introduction of private brands built around particular product attributes of customers — Aldi’s Specially Selected, Live G-free lines, for example, help pay for themselves with contributing to a better gross margin mix, Bolton added.

Both Aldi and Lidl appear to benefit from a simplistic “one store” philosophy that aids efficiency in areas like labor — all workers are trained to do all aspects of store work from ringing orders to unloading trucks to baking bread — and also applies in its promotional approach.