A PLACE WHERE WAL-MART ISN'T THE NUMBER ONE TOPIC

U.S. food retailers spend so much time thinking about the Wal-Mart challenge that it's hard to imagine the same intensity of thought wouldn't occupy European retailers. After all, Wal-Mart is now in both Germany and the United Kingdom, and has further designs on The Continent.Yet during a trip to Europe late last month, I found Wal-Mart was not the most pressing subject for European retailers and

U.S. food retailers spend so much time thinking about the Wal-Mart challenge that it's hard to imagine the same intensity of thought wouldn't occupy European retailers. After all, Wal-Mart is now in both Germany and the United Kingdom, and has further designs on The Continent.

Yet during a trip to Europe late last month, I found Wal-Mart was not the most pressing subject for European retailers and suppliers. Sure, executives are monitoring the movements of the Bentonville giant on The Continent. However, they are far more concerned with the obstacles posed by European food discounters.

European retailers such as Aldi and Lidl are known as "hard discounters" because they merchandise with extremely low prices and bare-bones esthetics.

Years ago, these types of stores were successful only with a certain segment of the population. But a reduction in spending power precipitated by more challenging economic times gave new life and influence to these discounters.

These kinds of retailers are shaking up traditional retailing as they move into countries and regions previously known for upscale retailing traditions.

The developments have impacted every level of food retailing. Upscale stores such as Tesco of the United Kingdom and ICA of Sweden are reacting by lowering prices or cutting assortments to better position themselves against Aldi-type limited-assortment stores, observers said.

In response, Aldi is reaching for a bit of the high ground by improving its notoriously bland shopping experience. It is tweaking its limited-assortment format to increase the number of products, improving the visual appearance of stores, and adding more fresh foods. Its shopping experience won't approach that of upscale stores, but Aldi will narrow the gap.

Not that Aldi is giving up the price card. Price is now king in Europe, along with reduced assortments. It's all geared toward driving higher volume at retail.

Some observers are beginning to worry that the new dynamics will come back to haunt stores.

One European distributor put it this way: "In some product categories, you now have the better stores showing only one major brand and a private label. This will be a problem in the future because consumers will find it boring. There's too little variety and too much focus on price. Supermarkets are being greedy by looking only at profits."

Does all this sound a little familiar? Supermarkets are losing focus on the customer's needs by concentrating too heavily on the bottom line. There's nothing exclusively foreign about that charge. Some contend U.S. retailers have followed the same path in recent years, even though the companies and players are different here.

However, American retailers have learned the hard way that one size does not fit all when it comes to serving customers. There is no single American consumer, just as there is no one European consumer.

U.S. retailers would do well to monitor how these developments play out in Europe because some valuable lessons will definitely surface.