Big Box Grocers Go Small As Lidl Enters U.S.

  • March 29, 2017 at 9:31 PM EDT
  • By Glenn Taylor
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Lidl’s expected entrance into the U.S. this summer has certainly kept American grocers on their toes. The retailer’s low-price, quality fresh foods assortment has dominated European food sales. Lidl’s offerings appear to be geared directly to U.S. grocery shoppers’ palates, so Walmart and Target are taking steps to transform their own smaller-format stores to match these consumer desires.

Walmart has rolled out a new 46,000-square-foot prototype location for its Neighborhood Market grocery stores in Myrtle Beach, N.C., that emphasizes fresh fruits and produce, updated signage, made-to-order deli offerings and wide aisles. The store features a full-service deli, pharmacy, fuel station and in-store bakery, and offers free store pickup service for online orders.

There are nearly 700 Neighborhood Market stores in the U.S., but as of now it is unclear how many of them Walmart plans on converting to this model. The move to give consumers more space in the store, while offering convenient but high-quality goods, positions the store more as a grocery than an alternative Walmart store format.

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The changes enable this store to differentiate itself, which is vital for Walmart considering its previous struggles with executing prior smaller-format concepts. The retailer closed all 102 of its Express locations in 2016 after the stores failed to reel in traffic. Walmart placed most of the Express stores within 10 miles of a standard Walmart location, with many in towns where the retail giant already had a presence. Additionally, merchandisers stocked the Express stores with numerous items that also were sold in Walmart stores, making the locations redundant.

Target Makes Drastic Changes To Store Design

At Shoptalk 2017, Target CEO Brian Cornell unveiled a new store design that features two separate entrances — one leading to apparel and home goods sections, and the other focused around convenience, where shoppers can pick up online orders and groceries.

Similar to the Walmart Neighborhood Market prototype, Target’s new store design emphasizes elevated product presentations and a more open feel for consumers browsing the aisles. The retailer also is now testing daily deliveries to select stores to improve its fresh produce section. As store traffic has declined for the brand, Target has had difficulty selling off perishable items before they spoil, necessitating changes to improve the grocery section.

In November 2016, Cornell had indicated that Target would be able to open “hundreds” of small-format retail stores, offering products appealing to each localized area — a value proposition Lidl brings to the table with its locally produced and seasonal goods. Target plans to open 30 small-format stores in 2017, focusing on densely populated urban areas and college towns.

Although Walmart and Target haven’t shared their thoughts on the incoming threat of Lidl or the growth of its often-paired counterpart Aldi, both retailers have clearly modified their offerings to further engage the modern shopper. But with Lidl already checking off many of these boxes, it’s now up to the U.S. brands to cost-effectively provide food and services that will continue to draw shoppers in.

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