Shopping Centers Today

NOV 2018

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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28 S C T / N O V E M B E R 2 0 1 8 R ising competition and a major expansion of online ordering is setting the stage for a major disruption of the U.S. grocery-store industry, according to a Morgan Stanley report. Much of that competition is coming from fast-growing Aldi, which is winning over customers with its lower prices, Morgan Stanley says in Food Retail: e War of Attrition Has Begun. •e hard-discount grocery chain has plans to open roughly 700 additional U.S. stores by 2022, which would bring its total here to about 2,500. •at would make Aldi the third-big- gest grocer in the U.S. by store count. •ere is now an Aldi store within -ve miles of roughly 46 per- cent of Walmart stores and 58 percent of Kroger stores, the report says. Aldi is squeezing compet- itors on the price front too. A February grocery-basket comparison showed that Al- di's items were about 20 per- cent cheaper than Walmart's or Kroger's, and 35 percent lower than those of regional grocers, according to the report."Importantly, we think it will be diŒcult for conventional grocers to ever catch up to hard discounters on price," said the report. "Aldi's price gap is mainly driven by its high private-label penetration (90 percent of SKUs), which can be priced more aggressively than branded products to attract consumers seeking value." Making them even more attractive to shoppers, hard discounters are adding more fresh products. As a result, Aldi is gaining shoppers. Among those who switched grocery stores this year, 19 percent went over to Aldi, compared with 15 percent last year. In this regard, Aldi did better than Costco, Kroger, Target, or Amazon.com-owned Whole Foods. •ough 30 percent of those who switched this year chose Walmart, that is down slightly from 31 percent last year. Q S T O R E F R O N T S namely going a—er B-quality sites, Baker says his sense was that Lidl thought it could enter the market and gain share quickly, perhaps thanks to its size as a global company. "I don't know that that's going to be the case here now, or ever," he said. Lidl would have been a late entrant into what is already an incredibly competitive Houston grocery market, he notes. •e good news is that backing out of Texas should be relatively easy, be- cause the company has not signed any lease commitments, Baker says. Another read on Lidl's shi— of both geographic and real estate strategy is the emergence of new leadership. In May the company announced that Johannes Fieber had been named president and CEO of the Lidl U.S. division. Fieber has been with the company for about a decade, having been CEO of Lidl's Sweden division. Among Lidl's challenges now is its entry into an already crowded U.S. gro- cery sector that operates on thin mar- gins as it is. Lidl's low-price model sets the company into direct competition with the likes of Aldi and Walmart, not to mention the dollar stores that oŸer discounted grocery items in their own right. When Lidl comes into a market it forces other grocers to drop their own prices, says Long. In the Carolinas, she says, Walmart, Food Lion and Dollar General have cut prices on some items by between 10 and 30 percent to com- pete against Lidl. Lidl can well aŸord to bide its time with expansion plans. Parent company Schwarz Gruppe is one of the 10 larg- est retail companies in the world. So though the privately held grocer did have to walk back that big number for projected store openings, there were no stock analysts holding them to any- thing, nor did the chain have to worry about shareholder impatience or about any troubling impact on share prices. "•e family can move at the pace they feel is right, and they can play this for the long game," said Mike Siska, a managing director of consumer and retail with Chicago-based William Blair & Co. "I think they have proba- bly learned an enormous amount over the past 12 to 18 months, and I would not count them out." Another positive for Lidl is that it seems to have caught the fond eye of the Millennials. A June survey by consulting -rm Oliver Wyman showed that nearly half the 600 respondents who had tried Lidl began to shop there regularly (de-ned as at least twice per month). Among the younger respon- dents, the numbers are even higher: 71 percent of those between 18 and 24 said they shop at Lidl regularly, as do 62 percent of those between the ages of 25 and 34. "If they continue on this path with a new strategic growth plan, and if they can stay nimble and keep changing as they see that they need to in order to suit the customer," Long said, "then I think they can remain viable in the long run." Q Aldi continues to disrupt grocery sector By Edmund Mander

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