Aldi and Lidl, Germany’s toughest discount food retailers, are invading the US. Both operate small, efficient no frill self serve supermarkets with a strong non-food assortment, and very low prices. Both have permanently changed the competitive landscape wherever they have gone.
Lidl is about to open its U.S. headquarter in Arlington, Virginia and a distribution center in Alamance County, North Carolina. These are early steps in its U.S. invasion by this formidable company that operates about 11,000 stores in 26 countries throughout Europe. I am told that the company has already selected 80 locations in the Greater Washington, D.C. area and plans to open over 500 stores in 2018. Near term plans aim for 2,000 new stores in the United States by 2020.
Aldi has two major divisions, Aldi South (Sued) based in Muehlheim an der Ruhr, Germany, and Aldi North (Nord) based in Essen, Germany. The word Aldi was coined from the word Albrecht, the surname of brothers that founded the enterprise, and the word Discount.
This privately held company operates about 9,600 stores in Europe, United States and Australia.  Aldi (Sued) already operates 1300 supermarkets in the United States and plans to add 200 in the near term. Aldi (Nord) now operates 418 Trader Joe’s supermarkets in the United States. They made their debut in Southeastern Iowa in 1976, have expanded gradually in areas like Michigan and Missouri. Most recently new divisions opened in Connecticut, Florida, Texas and Georgia. Future plans for growth includes Royal Palm Beach, Florida, Rosenberg Texas and Moreno Valley, California.

I believe that the major expansion of Aldi and Lidl in the United States will affect traditional supermarket operators like Kroger, Safeway and Giant, but will also affect supercenters of Walmart and Target.  These smaller sharply priced formats provide important incentives for customers to frequently return to their stores.
Where others have failed, including Tesco’s Fresh & Easy convenience stores, I believe Aldi and Lidl will be successful.  Tesco’s Fresh & Easy’s launch in the western U.S. did not succeed due to poor locations and poor market research.  After 10 years, the company recently abandoned Fresh & Easy and sold off the store locations.  In contrast, both Aldi and Lidl have successfully invaded the United Kingdom in the past five years, affecting sales and profits of major supermarket retailers like Tesco, Morrison, and Sainsbury. They have taken their time to study the U.S. market and are now ready to expand aggressively with a full knowledge of the competition and the opportunities.Both Lidl and Aldi’s major push in the United States will make price the cornerstone of their strategy.  They will position themselves by offering the lowest prices on consumables as well as select non-food items. The stores will be rudimentary, but clean and attractive, and easy to shop.  Historically, the consumer saw both Lidl and Aldi as “cheap” retailers, but they have been able to change their image and win over the middle class customer. A recent report  shows that both Lidl and Aldi have gained substantial market share in the United Kingdom.
Lidl is owned by the Schwarz Gruppe, (Schwarz Unternehmungs Treuhand KG) a privately held German company headquartered in Neckarsulm, about an hour south of Stuttgart. Sales in fiscal 2014 were 79.3 Billion Euros with a target of 100 Billion Euros for the year 2020, a compound growth rate of 5.2%. Since 1976, Klaus Gehrig, a strict administrator, has run the company.  He recently assigned Sven Seidl to run Lidl, and Frank Lehmann to run the Kaufland hypermarket division with its branches in Germany, Czech Republic, Slovenia, Rumania, Bulgaria and Croatia.
Throughout my years following the global retail industry, I have always found a new retailer that sold merchandise cheaper. The discount stores are now competing with Wholesale Clubs, off-price stores, and Internet giants like Amazon. Today they are facing a new onslaught of “lowest price retailing” in general merchandise and food.  In apparel we also see low price foreign invaders.  We have already warned that Primark will affect many apparel retailers when it enters the United States later this year and begins its expansion.
I have a feeling that Walmart is preparing for the onslaught. Doug McMillon, CEO of Walmart recently said “there is a seismic shift in the structure of retail markets across the world.” Brian Cornell, CEO of Target has made it a priority to improve the food selection.  It is primarily price that will drive these new competitors and the competition must be ready to respond. No doubt, the big U.S. discounters like Walmart and Target, will respond with aggressive promotions both in stores and online.  The stage is set for a battle of epic proportion. The question is whether the customer will have any loyalty or will shop only for price.