Lidl enters the field - German food discounter

Discount Store News, Sept 19, 1994

If U.S. retail entrants to the UK generally grab the most column inches in the trade press this side of the Atlantic, German food discounter Lidl, soon to launch in the UK, is certainly giving PriceCostco, TJ Maxx and Home Depot a run for their money.

Since it was disclosed last year that the Neckarsulm-based discounter, a subsidiary of the 13.4 billion mark turnover giant, Lidl & Schwarz, was to target the UK, stories have abounded on a weekly basis. Fifty stores were to be launched simultaneously in a feat previously unknown to mankind, ran one report.

Others accused the cash-rich company of hiking up going rents for the edge of town sites favored by the growing army of food discounters.

Both stories contain a large element of truth. Lidl is poised to launch a handful of stores simultaneously in the run-up to Christmas.

While its more timid Continental counterparts, such as Carrefour division, Ed, and Dansk discounter Netto, have kicked off in one small area of the country, Lidl has embraced the whole of the UK. It has agents hunting for sites as far afield as London, Scotland and Wales.

Lidl has indisputably fought off competition for good sites by paying rents above the market value. Its rents peaked at [pound]12 per sq. ft. for a store to the North of London. But industry observers believe Lidl's willingness to invest in good locations indicates a strong commitment to the market.

The fact that Lidl has been forced to invest so heavily in acquiring good sites reflects the growing scramble in the discount food sector. Food discounting in the UK, which died in the '70s, rose again only four years ago. Kwik Save stepped up its expansion nationally, attracting a range of recession-struck shoppers with its relatively wide, branded offerings.

At the same time, Aldi and Netto entered the UK from the Continent. All fared well in Northern and Midlands heartlands and have since moved South.

More recently they have been joined by Penny Market, a REWE/Budgens joint venture, and the French discounter, Ed, part of the Carrefour group. Continental discounters stock around one-third of the lines of an average Kwik Save store in a decidedly spartan environment.

And, unlike Kwik Save, they stock mainly little-known brands.

Some observers doubt that the appeal of the most stripped-down of the discount players will last post-recession. "For most women with families in paid employment, discounters do not offer sufficient range," said Chris Davies, chairman of consultants Group X.

He believes the appeal of food discounters will always be confined to the lowest income groups.

But others detect a change in consumer attitudes, prompted by the recession and the arrival of high-profile discounters as PriceCostco. Mainstream food retailers have responded by developing their own discount formats, with varying success, and by cutting some prices. But discounters have fought back, cutting prices far more aggressively. Lidl's arrival is seen as further proof that discounters are here to stay. And in spite of the intense competition it will face, it is likely to succeed.