German cut-price supermarket operator may be about to open its first store in Australia, adding further pressure to the incumbents.
According to The Australian, Lidl has applied for hundreds of trademarks covering thousands of supermarket products. The retailer is also reported to have been in contact with logistics providers recently, to assist creating a network of distribution centres and transport links to move supermarket products around Australia.
Lidl, owned by Schwarz Group, was recently ranked the equal fourth-largest retailer in the world, with sales of US$98 billion, by accounting firm Deloitte. Walmart is the largest, followed by Costco while French retailer Carrefour comes in at number three.
Lidl offers a similar shopping experience to fellow German retailer Aldi, offering mostly private label products, with many still in their shipping pallets/containers. But Lidl differs from Aldi in that it also has a range of premium brands and according to The Australian, 'a strong range of high-end wines'.
It remains to be seen where Lidl will set up shop, with heavyweights Coles – owned by Wesfarmers Ltd (ASX: WES), Woolworths Limited (ASX: WOW), Metcash Limited (ASX: MTS) backed IGA and Aldi stores dominating prime locations near consumers.
Over the past few years, Aldi has grown its market share to 8% according to Moody's, with Woolworths and Coles holding 37% and 26% respectively. Metcash holds 11%, while independents and other supermarket retailers hold 18%. Roy Morgan estimated Aldi held 10.3% of the market as at December 2013.
The biggest losers from the arrival of Aldi has been the independents and Coles so far, with Woolworths managing to hold onto its market share. The arrival of Lidl may do more damage to Aldi given their similar value propositions, particularly if Woolworths, Coles and IGA also fight back.
Most consumers choose their supermarket based on location and convenience before price and value. That gives the incumbents a big advantage over new arrivals.
Lidl is going to have its work cut out.
