Lidl Likely to ‘Copy’ Aldi in U.S.: Analyst

LONDON — The analyst who reported that Schwarz Group is studying the U.S. for potential expansion of its Lidl discount chain believes the company will be building stores there by early 2015.

Matthias Queck, a research director at Planet Retail here, in a recent web presentation said that slowing growth in saturated European markets is forcing Schwarz to look at new markets, including the U.S. Currently operating in 26 European countries, Lidl is the largest grocer by sales in all of Europe, but it is “poised to find greener pastures beyond the trodden paths,” as growth in existing markets has slowed while the U.S. discount channel is still underdeveloped, Queck said.

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Planent Retail in June reported that Lidl has assigned two executives — Kenneth McGrath, managing director of Lidl Ireland; and Kevin Proctor, a member of Lidl Ireland's executive board — to study the feasibility of a U.S. expansion, but Queck suggested a decision to enter the U.S. has likely already been made. “We consider the so-called feasibility analysis to be a factual ‘yes’ to a market entry, rather than an open question, simply because the company is in need of new long-term expansion while it is nearing saturation in 26 European markets, some of which will remain economically challenged for years to come,” Queck said.

Queck said that the Lidl study is expected to be complete by the end of 2014 and that the company could open as many as 100 stores in 2015 as part of a $650 million expansion. He said Lidl would likely build on the East Coast where its limited-assortment discount model has already proven successful by its Germany-based rival Aldi, which has operated in the U.S. since 1976.

“Rather than open in a new area with a new concept, Lidl may feel safer elsewhere, even if it’s not alone,” he said. “It would allow it to copy the assortment of its rivals rather than taking the risky and complex route of finding the right product for such a diverse market.”

Queck said Lidl has previously been successful growing through what he called a “copycat” strategy in European markets. In the U.S., the retailer would take a similar path to Aldi, locating first in strip shopping centers nearby larger retailers, before pursuing standalone boxes and stores offering additional brands and services. He said its U.S. strategy would be “Aldi-plus and see what happens.”