As Kantar Retail will expand upon in several upcoming research pieces, the discount channel in Europe is undergoing a process of evolution and reinvention. In some cases, the traditional discount concept—EDLP, compact, easy to shop, and a limited number of categories and SKUs per category—is evolving into something akin to a supermarket. German discounter Lidl is leading this evolution, as it continues to move away from this traditional model; implementing instead a sophisticated and more complex promotional strategy, as well as increasing its assortment and the overall visibility of branded products.

As part of its strategy in the UK, Lidl is trying to convert shoppers who use its stores to top up their weekly shop completed elsewhere, into regular weekly customers who purchase the bulk of their groceries with Lidl. As the retailer attempts to become more relevant to the British shopper, Kantar Retail recently conducted several store visits to find out what shoppers are really getting. Figure 1 is a breakdown of the number of SKUs in each category across the store.

Figure 1: Store Layout and SKU Count

Source: Kantar Retail

Lidl’s total assortment (including promotional listings) equals 1,919 SKUs. This SKU count is at the top end of the spectrum of Lidl’s overall assortment offer, as it looks to succeed in a highly competitive market. The retailer is certainly giving more space and SKUs to perishables, specifically fresh produce, which included 70 SKUs in its primary position, with an additional 28 located at the back wall. This focus on perishables is helping to reinforce its quality message as well as target more affluent shoppers.

Chilled categories are also clearly benefiting, with dairy and packaged meat being amongst the top three categories in terms of SKU count. Interestingly, HBC makes up a sizeable amount of the total assortment (98 SKUs). Lidl certainly understands the importance of brands in the category, as they are blocked together without interspersing private label. By the same token, manufacturers are looking to grow with Lidl and aid the retailer’s efficiency objectives by providing bespoke multi-SKU packs.

As it looks to address the weekly consumption needs of shoppers, it is interesting to see that Lidl’s total assortment breaks down into the following structure (Figure 2).

Figure 2: Assortment Structure

Source: Kantar Retail

This high proportion of edible grocery highlights why discounters like Lidl are becoming more relevant to British consumers. The store, specifically its assortment, caters to shoppers who want a quick and easy shopping trip, as their personal and work lives get ever busier. It shows that Lidl is not pretending to be anything other than a store where you can buy all the food and groceries you need, with a little bit of what you might want in the shape of impulse/discretionary non-food items.

Figure 3: Promotion

Source: Kantar Retail store visit

As the UK is one of the most promotional markets in Europe, Lidl has looked to implement different mechanics than it does in other markets, like multi-buys. However, there is a certainly evidence that Lidl is becoming far too promotional, as promotional listings make up 13% of its total assortment (Figure 4).

Figure 4: Percentage of Total Assortment by Category (including Promotional Listings)

Source: Kantar Retail

This fall away from EDLP to an increasing reliance on promotions has been creeping into to Lidl stores across several markets. As mentioned earlier, it is evidence of Lidl seemingly abandoning its discounter traditions. In a market where shoppers are inundated with promotions, and confused about what and how to buy, Lidl is progressively becoming part of the problem and not the solution.

That said, we are more encouraged by other evolutions in Lidl’s strategy in the UK (Figure 5). Its recent introduction of the “Simply” range of private label items means that it now has a “Good, Better, Best” private label architecture with which to try and capture a broader cross section of British shoppers (although it might be fair to suggest that the premium “Deluxe” range has more of a role to play as a seasonal driver, as its composition is highly seasonal in nature with very few constant, year-round listings).

Figure 5: Simply Range

Source: Kantar Retail store visit

Lidl is also faring well in the UK, by playing up its credentials in areas such as fresh and wine. Its messaging around produce and meat, particularly the British sourcing of the latter, is both timely and effective, as its attempts to “premiumise” its wine offer by rolling out new POS and fixtures (Figure 6).

Figure 6: Wine Cellar Concept

Source: Kantar Retail store visit

These measures are all well and good in terms of driving new shoppers and traffic, but we still remain concerned that Lidl’s departure from the very bedrock of the discount philosophy might cause confusion and undermine the retailer’s long-term performance. Lidl’s rise to power has been due to being different to the supermarkets, not an imperfect imitation of them.