Lidl, discount stores not just for low-income brackets: report

Expert believes draw of “savvy” shopping can threaten higher end retailers

Germany’s Lidl appeals to American shoppers from all ends of the economic spectrum and could siphon off a significant amount of business from retailers that cater to high-income customers, one expert believes.

George Faigen, a partner at Oliver Wyman, cited his firm’s independent report that warns food retailers to prepare for the discount grocer’s arrival into their market.

“The industry believes that Lidl is not that much of a threat,” said Faigen.

The German-based chain has a small presence in the U.S. with locations in the Carolinas and Virginia, but the brand plans to “massively expand” across the country, according to Faigen.

“When you look at the income profile, the Lidl shopper and the average shopper have a very similar distribution of people who are wealthy and really don’t need to save money as well as people who are economically strapped and must save money. This by itself was a major finding,” he said, asserting that there is “little difference between Lidl shoppers and everyone else.”

Faigen credits this broad appeal to Lidl’s discount-heavy model and the quality of its private label.

“The myth in the industry is the discounters serve the under-economically privileged and, thus, they are not a threat [to traditional grocers],” said Faigen.

He believes that even consumers who do not need to save money are still drawn to an opportunity to do so and this concept pokes a major hole in the aforementioned myth that discounters attract low-income shoppers.

Faigen said that consumers in higher income brackets often like to think of themselves as “savvy shoppers” who can find a great deal regardless of their economic situation. He said that these customers are “proud” to shop at discount retailers because they believe they are getting a deal on goods of equal or better quality.

The brand’s June debut in the United States gave way to a slowdown in traffic as the summer wore onward before notching an uptick in visits in September, according to a report from inMarket.

Faigen believes that these early falters in traffic are not indicative of the brand’s long-term projections.

The report asked shoppers who had yet to experience Lidl but had learned about it from advertising, word of mouth and over avenues if they thought they may become a repeat shopper at the store in their area. Thirty-nine percent answered yes. A survey of shoppers who had already experienced the store found 56% of respondents reporting that they planned a repeat trip to Lidl.

“It was more than a one-hit wonder,” said Faigen. “That’s not an indication of long-term loyalty, but it is an indication that Lidl is doing many things right.”

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Twitter: @DanAMX

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