US Insights

Here's How Lidl Will Break Into the US Market

Simon Johnstone

Senior Analyst

Retail 03.09.2017 / 13:00

Lidl_Fuengirola

Lidl's biggest challenge will be convincing US shoppers to walk in the door.

Lidl U.S. chief executive Brendan Proctor recently offered up details about how it plans to break into the US market, including store size, layout and subtle shifts in assortment. However, Proctor also said “Lidl would not discuss its marketing strategy.”

It's interesting considering that Lidl’s biggest challenge will be convincing US shoppers to walk in the door. To get a clearer picture of the moves Lidl is likely to make in the U.S. we took a look at the strategies they've employed across Europe.

In Europe, Lidl has struggled to educate the shopper of its “discounter” principles and shake off its reputation as a poor quality, cheap store in some markets. Its store modernization and refurbishment program (Store of the Future) has been a direct response to this, but Lidl has also acknowledged the role marketing plays in doing this. As a result, Lidl has not only invested significant amounts in marketing, it has made it a priority in nearly every single market it operates in. To get an idea of just how important it is, you need only look at UK and France.

Lidl UKFrance Spend

Lidl and Aldi have a combined market share of over 10 % in the UK, yet account for almost 50% of the advertising spend between themselves and the big 4 retailers. In fact, Lidl spent more on advertising than any other retailer in 2015. This gap will only widen as the majority of retailers cut advertising and marketing budgets, while Lidl will continue to increase its own.

In France, Lidl’s market share is not at the 6% mark yet, in 2016, it became the number one spender on advertising in retail, spending over EUR 400 million. Indeed, Lidl came second in advertising spend across multiple industries in France including retail, food, automotive and travel.

In Poland they are also the number one spender on advertising. Indeed, pick any market and Lidl will likely be in the top 3 of spenders on advertising in grocery retailing.

Lidl’s US Marketing Strategy

Lidl’s marketing strategy in the USA will follow the same blueprint we see across Europe. However, there are three key areas to keep in mind.

Lidl Venn Diagram

1. Lidl will invest a significant amount of money on advertising in the USA. The retailer knows the effectiveness of simple and effective marketing, supplemented by the power of customer voice. Lidl famously renamed its milk to Bosses Mjölk (Bosse’s Milk) in Sweden, after a man named Bosse Elfgren asked on its Facebook page, why he should drink German milk, with the original question and Lidl’s response, which stated its private label product has been 100% Swedish since 2010. In the UK Lidl have used Shopper tweets about its surprisingly good food as marketing in store. Lidl will face similar scepticism in the USA and what better way to convince other shoppers of its quality than by hearing from the ones that have already been convinced of it.

2. Lidl’s focus on reinforcing its discounter credentials and focusing on lifestyle is particularly important in the US because it is its fierce competitor Aldi that will ultimately allow Lidl to shift its message quickly. The reason is Aldi has spent over 30 years doing an incredible job of educating US shoppers about the discounter model. Its Aldi Truths campaign stands out as a best in class example of this.

Lidl Aldi Truths

3. Warning: As Lidl interweaves its narrative under the three key messages (Solution, Surprise and Fresh/local), the rebailer will use CPG brands in different ways. Lidl uses brands to reinforce the price advantage on its own private label range. This can be done by taking a firm anti-brand stance (i.e. the brand is not in store such as Lidl’s New Full Shop Half Price Campaign in Ireland.)

Lidl Beat Brands

However, Lidl has recognized the need for brands in store to reinforce the price advantage of its private label at the shelf.  Importantly, there is a shift taking place under the tagline “you have the choice” (currently in three markets) where CPG products will stand out both in store and in marketing materials. Lidl’s message is clear to shoppers. We have the brands you want and need (Lidl win a Trip). We also have the private label equivalent which is of high quality but at a significantly lower price. The initiative is new and we at Kantar Retail are watching it with huge interest because the USA is a perfect market for Lidl to roll out this initiative.

Overall, Lidl’s marketing strategy will be about giving US shoppers another choice in where they can buy their groceries and giving them reasons to make that choice – by surprising them, providing solutions and offering fresh local high quality food. Marketing is one of Lidl’s biggest weapons and they are going to use the full force of it.

Source: Kantar Retail

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