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Study: Lidl store openings bite into competitors’ sales

Existing grocers feel impact more in fresh, less in center store

Russell Redman

June 20, 2018

4 Min Read
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When hard-discount grocery chain Lidl brings its low prices to town, incumbent supermarkets need not panic.

A study by Catalina finds that while a Lidl store opening siphons sales and customers from area grocers, these supermarkets recover much of the losses and can take clear steps to safeguard their business going forward.

In the analysis, titled “Defending Supermarket Share When Lidl Comes to Town,” Catalina examined shopper behavior at 83 supermarkets within three miles of 30 Lidl stores that opened in 2017. The study monitored shoppers across grocery departments and demographic groups for the first 16 weeks after a Lidl opening.

Established grocery stores, on average, lost 4.3% of sales and saw declines of 5% in customers and 3.6% in shopping trips. But the impact dissipated as time went on. Sales fell 6.8% in the first month and 6% in the second month following a Lidl opening, yet the decrease shrank to 2.7% by the third month and 1.9% by the fourth month.

“While Lidl had a significant effect on competing supermarkets during the first two months after its openings, that impact declined precipitously by the third month, as many trial Lidl shoppers returned to their past shopping behavior,” St. Petersburg, Fla.-based Catalina said in the report.

Related:Lidl kicks off Shipt delivery in northern Virginia

Lidl’s sales impact was apparent in specific product categories, the study noted. Produce, beer and wine represented 60% of the total sales decline, yet were only 16% of overall store sales. Similarly, seafood, meat, deli, frozen, bakery and tobacco accounted for 33% of the sales loss but were 30% of store sales.

Meanwhile, the center store saw far less of an impact from a Lidl opening, Catalina found. Shelf-stable grocery and general merchandise accounted for 7% of the sales loss, but those categories were 40% of store sales.

“Lidl stores are known for low prices, quality produce, meats and bakery, a focus on carrying store-branded shelf-stable products and minimal representation of national brands. Shoppers reacted with varying levels of enthusiasm to these categories,” the report said. “Dairy and health and beauty [care] were not impacted by Lidl during the study period, possibly driven by competitive promotions, limited choices from Lidl and high loyalty toward HBC name brands.”

With the vast majority of Lidl’s assortment being private brands, it wasn’t surprising that 58% of sales lost by incumbent supermarkets were private label. Still, that loss represented just 28% of overall store sales. Name brands accounted for 42% of the sales loss yet were 71% of store sales.

Related:Lidl U.S. names new CEO

“Name-brand products at competing grocers delivered a significant competitive advantage against Lidl’s heavy emphasis on private label. In fact, the percentage of sales declines among name brands was roughly 3.4 times less than for private label products at competing grocery stores,” Catalina pointed out. “Given the overall high margins in private brands, the implication is that margin losses were greater than sales losses.”

On the customer side, Catalina’s research revealed that existing shoppers — those who continued to shop at their regular store but bought less — represented 74% of sales losses. Shoppers who defected from their regular store at greater-than-expected rates contributed to 22% of lost sales. Four percent of the sales loss was new buyers.

“This study demonstrates the importance of shopper analytics in helping retailers keep pace with new competitive threats and changing shopper behavior. Retailers need to pay close attention to how new competitors are impacting their shoppers and respond with the right pricing and promotions strategies to protect and grow share,” explained Tom Corley, chief global retail officer and president of U.S. retail at Catalina, which specializes in shopper intelligence and personalized digital media.

Demographically, a Lidl store opening impacted current supermarkets primarily with Hispanic and African-American customers, whose purchases fell 9.2% and 5.4%, respectively. Sales were down 3.7% to Caucasian shoppers and 3.3% to Asian-American shoppers when Lidl entered the market.  

Sales to households with five or more people fell at 127% of the average upon a Lidl opening. Younger shoppers were slightly more likely to reduce purchasing, while shoppers 65 years and older were impacted 25% less than the average. The study found no meaningful variance among income groups.

Personalized promotions and pricing — targeting heavy buyers, Hispanics, younger shoppers and larger families — can help incumbent supermarkets defend their market share when they go up against Lidl.

“It is also clear that well-recognized brands can provide a strong competitive advantage against new retail models, including Lidl, that emphasize private labels over name brands,” Corley added. “Retailers should work with their manufacturing partners to fully leverage that advantage.”

About the Author

Russell Redman

Senior Editor
Supermarket News

Russell Redman has served as senior editor at Supermarket News since April 2018, his second tour with the publication. In his current role, he handles daily news coverage for the SN website and contributes news and features for the print magazine, as well as participates in special projects, podcasts and webinars and attends industry events. Russ joined SN from Racher Press Inc.’s Chain Drug Review and Mass Market Retailers magazines, where he served as desk/online editor for more than nine years, covering the food/drug/mass retail sector. 

Russell Redman’s more than 30 years of experience in journalism span a range of editorial manager, editor, reporter/writer and digital roles at a variety of publications and websites covering a breadth of industries, including retailing, pharmacy/health care, IT, digital home, financial technology, financial services, real estate/commercial property, pro audio/video and film. He started his career in 1989 as a local news reporter and editor, covering community news and politics in Long Island, N.Y. His background also includes an earlier stint at Supermarket News as center store editor and then financial editor in the mid-1990s. Russ holds a B.A. in journalism (minor in political science) from Hofstra University, where he also earned a certificate in digital/social media marketing in November 2016.

Russell Redman’s experience:

Supermarket News - Informa
Senior Editor 
April 2018 - present

Chain Drug Review/Mass Market Retailers - Racher Press
Desk/Online Editor 
Sept. 2008 - March 2018

CRN magazine - CMP Media
Managing Editor
May 2000 - June 2007

Bank Systems & Technology - Miller Freeman
Executive Editor/Managing Editor
Dec. 1996 - May 2000

Supermarket News - Fairchild Publications
Financial Editor/Associate Editor
April 1995 - Dec. 1996 

Shopping Centers Today Magazine - ICSC 
Desk Editor/Assistant Editor
Dec. 1992 - April 1995

Testa Communications
Assistant Editor/Contributing Editor (Music & Sound Retailer, Post, Producer, Sound & Communications and DJ Times magazines)
Jan. 1991 - Dec. 1992 

American Banker/Bond Buyer
Copy Editor
Oct. 1990 - Jan. 1991 

This Week newspaper - Chanry Communications
Reporter/Editor
May 1989 - July 1990

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