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Discount Retailers Race to Gain Edge in U.S. Market

Discount Retailers Race to Gain Edge in U.S. Market

German retailer Lidl plans to expand into new markets, including the U.S. and Australia, becoming direct competition for similar discount retailer Aldi. Lidl will invest $202 million to create a U.S. headquarters in Arlington, VA, and a distribution center in Spotsylvania County, reported The Washington Post. Of that investment, $77 million will be used to build its U.S. headquarters and $125 million will go towards the regional headquarters and distribution center. It plans to open its first U.S. stores in 2018, which will add to the 10,000 stores it currently operates in Europe.

Lidl is also reportedly planning an expansion into Australia, reported The Conversation. The company has not released a statement on the matter, but trademarked 500 brand names in Australia, including its own name. There have also been reports of the company looking into logistics and distribution sites. After Aldi entered the Australian market in 2001, the discount model and private label products have become very popular in the country. Analysts anticipate Lidl’s entry into the country being easier and quicker than Aldi’s since it already paved the way for Lidl, and many private label manufacturers may be eager to work with the company.

Aldi is trying to expand its presence in the U.S as well. It will open 45 stores in Southern California in March 2016, adding to its almost 1,400 locations in the country, reported The Los Angeles Times. It is also building a regional headquarters and distribution center in Moreno Valley in hopes of expanding even more in the future. Some analysts say the introduction of Aldi into the California market could force other retailers to lower their food prices in order to compete. However, even if other retailers do lower prices, they may have trouble keeping customers away from Aldi, as it has a unique format and concept, keeping costs very low. Its stores are generally around 40,000 sq. ft. smaller than traditional grocery stores and 90% of its products are private label. Its stores also have a spartan look and only offer a few varieties of each item.

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Lidl could be the first comparable competition for Aldi in the U.S. market, though. There are few discount grocers in America, besides Walmart which doesn’t receive most of its sales from food items, reported The Wall Street Journal. One analyst from Kantar Retail says Aldi is most likely aiming to open as many stores as it can, as quickly as it can, before Lidl officially enters the U.S. market.

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