Will the economic carnage from COVID-19 push more middle-class consumers toward hard discounters like Aldi and Lidl?
As the Great Recession showed a decade ago, consumers will turn to lower-cost alternatives for basic needs when they’re belt-tightening, meaning they could follow suit in the wake of layoffs and shutdowns sparked by the coronavirus pandemic.
But data from the National Retail Federation suggests the middle class may already have taken note of the limited-assortment grocers: both made the trade group’s list of “Hot 100 Retailers” last month, with Aldi also called out for recent additions sure to catch the eye of “more affluent” shoppers.
The two companies, rooted in Germany, use a smaller store footprint, private-label brands and no-frills interior to appeal to price-conscious food shoppers.
Aldi, which landed in the U.S. in 1976, and Lidl, a newcomer in 2017, were busy expanding before the pandemic struck and haven’t let up.
Aldi initiated a huge remodel just ahead of Lidl’s U.S. arrival, announcing plans to spend $1.6 billion to spiff up stores and expand produce, meat, dairy and bakery offerings. Its store count hit 2,000 over the summer, with 70 more locations expected by year’s end.
Lidl, meanwhile, stumbled a bit out of the gate, and reached its goal of 100 stores later than anticipated. But it took Long Island by storm in acquiring two dozen Best Market stores, and snagged a half-dozen Shoppers stores in metro Washington, D.C.
Last month, Lidl said it would open 50 new stores on the East Coast by the end of next year, including six in New York. (The closest to us will be in Queens.)
Lidl topped the Hot 100 Retailers by virtue of U.S. sales growth between 2018 and 2019 of 69 percent, according to the National Retail Federation. Aldi’s growth was pegged at 8 percent, although its overall 2019 sales were much higher than Lidl’s.
In a blog post accompanying the list, the NRF noted Aldi’s decade-long shift from focusing on lower-income shoppers to pursuing middle-class ones through improvements in merchandising and product assortment.
The post cited the addition of online ordering and curbside pickup as “amenities targeting more affluent shoppers.” Pickup is not available at all locations, but a handful of local Aldi stores have the service. Both Aldi and Lidl offer home delivery.
Bill Bishop, a co-founder of Brick Meets Click, a suburban Chicago supermarket consultant, says consumers’ initial reaction in the pandemic lockdown was to concentrate their grocery spending with the big supermarket chains.
But six months in, the hard discounters are getting a look, particularly Aldi.
“Given Aldi’s strong low prices, we see them growing their share of households who previously had not been willing to given them a try,” he told me in an email. “It’s hard to see how they don’t come out of this with a significant broader base of shoppers.”
Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at [email protected]