Aldi and Lidl: A journey from hard discounters to multichannel retailers

Discounters are different and will always be different. Indeed, Lidl and Aldi’s rise to power in Europe has been the direct result of them being different to other channels and not an imitation of them. The softening of the hard discounter model has seen discounters become mainstream shopping destinations but they are now moving into a new era of disruption – multichannel retailing. At the same time, most European retailers have, or are opening, smaller stores in proximate locations, trialing new fulfilment models, launching online and reinventing big stores as consumers continue to favour convenience, instant gratification and unplanned shopping trips. Today, discounters are still geared up to fulfil replenishment and main shopping trips but are trying to encroach on the rest of the trade in terms of locations and shopper missions. To do this requires a multichannel approach of their own, meaning moving formats away from a one-size fits all strategy to a flexible approach that gets its offer closer to shoppers. As a result, Lidl and Aldi now open and operate three or four distinct formats:

1. Full-service store

Discounters are investing in refurbishing and extending traditional stores and as well as opening stores of the future, designed to enhance the overall shopping experience. However, it is the stores modular design that will drive greater disruption in grocery retailing. In these new stores, only a small proportion of the selling space is what we call 'permanent'. Instead, the store is designed for flexible space use (ability to break down and move shelves) or temporary space, such as increasingly using gondola end promotions. This modularity ultimately allows discounters to adapt their stores quicker than rival retailers, differentiate and unlock more sales opportunities.

2. Neighborhood and express stores

Experimenting with new concepts to fill gaps in their strategy has always been on the discounter agenda. However, they are now showing a concerted effort to not only operate, but succeed in urban areas through new locations and new stores. This requires taking on significant complexity to their business model, such as more staff, self-checkouts or conveyor-less checkouts, unique merchandising planograms, tailored ranges, food-to-go, new pack sizes, and a reduced non-food range. 

3. Online

Both Lidl and Aldi operate online stores but it is Lidl who is strategically growing its eCommerce operations. Lidl sees online as a means in which to extend its offer, predominately around non- grocery and drive an exciting and exclusive offer outside its stores. Aldi’s online strategy is different and centers on fixing or innovating around a particular problem. There is a reason Aldi chose the UK as its first European market to launch online – it has a problem. That problem is it has too many people in its stores and too many people waiting to get into the car park on the days of its special buys, which continue to be a primary trip driver for a main shopping trip. The launch of its online store aims to alleviate these issues. As a result, the entire online offer is designed around lifestyle messaging as opposed to calling out weekly specials on particular days. The ability to buy non-food specials at any time means shoppers can choose to do their shopping on alternate days, thereby spreading out the weekly traffic into stores and Aldi are less likely to lose trips as a result.

Aldi and Lidl’s disruption of the retail landscape is moving beyond price. A multichannel strategy is driven by testing and learning behavior, which heavily influences shopper dynamics. Big retailers are going to have to be both proactive and reactive to combat this shift.

To hear more on how they are doing this join Kantar Retail at its RETAIL NOW & NEXT: 2017+ Event in Amsterdam on the 30th March 2017.

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