Aldi Vs Lidl in US: Who will lead the Grocery Retail Disruption?
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Case Code: BSTR558 Case Length: 11 Pages Period: 2017-18 Pub Date: 2019 Teaching Note: Available |
Price: Rs.300 Organization: Aldi, Lidl Industry: Retail Countries: US Themes: Corporate Strategy, Growth Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Discounters' Stint in the US
Aldi had been around in the US for more than 40 years. It was considered a major force in the industry and was known for its simple strategy of delivering low prices. In the US, Aldi's emphasis was on keeping its costs low in all aspects. It selected lands for its stores on the outskirts of cities to take advantage of low rents. The stores were smaller than a typical supermarket in the US. Initially, there was no air-conditioning and perishable products were stocked in the cellar. Unlike other retail stores in the US, Aldi stores were not kept open for long hours and were opened only during the prime shopping time....
Counter Moves to Combat Lidl
In anticipation of Lidl coming to the US, intense price wars started shaking up the entire US grocery sector. Amidst the massive upheaval caused by Lidl's entry into the US, its biggest competitor, Aldi, planned big changes...
Lidl's Hyped Entry
In June 2017, Lidl marked its entry with the tagline "Rethink Grocery" and opened 10 stores across the US. The Lidl stores offered "a manageable, easy-to-shop" six-aisle layout to consumers...
Entry Gone Awry
Within a month of Lidl's entry into the US, Kroger Co. filed a suit in the US District Court in Virginia against Lidl citing a trademark infringement. Kroger claimed that Lidl's "Preferred Selection" line of private label goods copied the look of Kroger's "Private Selection" brand. Kroger's complaint alleged..
Lidl's Change in Strategy
By end of 2017, Lidl finally realized that it needed to scale back its US strategy. The company decided to slow down its expansion across the US and re-evaluate its network, location, and store propositions. It opened 53 stores instead of 100 in the first year of operation...
Challenges Ahead
Analysts had mixed views on the disruption by discounters. Some opined that discounters would not have much to offer consumers apart from the price advantage. They felt that the discount model would face tremendous pressure in future as the biggest competitors were willing to sacrifice margins to maintain market share. Some analysts predicted that discounters' revenues would rise 8 to 10 percent by 2020, which would be five times faster than traditional US grocers. The discounters were expected to account for up to US$67 billion in combined sales and operate about 3,500 US stores by 2021...
Exhibits
Exhibit I:Lidl's Expected Sales in US
Exhibit II: Lidl's offers to the US Consumers
Exhibit III: Average Price Difference between Lidl and Other Players
Exhibit IV: Fall in US Retail Food Prices (1967-2016)
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