Blog #11: Austerity from Europe

Five-hundred-and-forty degrees away from the ultra-extravagant European hypermarket invasion of the United States in the 1980s—a surprise attack that ended in utter failure—a new European incursion is set to commence. This time, two no-frills-to-the-gills discount supermarket chains are poised to sweep into North America.

These two chains, both based in Germany, are Aldi and Lidl. In stark contrast to the hypermarkets of the ‘80s, which imported an awesome abundance to America, the new entrants promise nothing but scarcity.

Aldi—a contraction of Albrecht Discount—is a German food store chain divided by family animosity into separate and competing north- and south-based companies. Aldi Nord is the more upscale of the two. Much to my surprise, it owns Trader Joe’s.

Aldi Sud, on the other hand, is decidedly downscale. It carries only a limited assortment of cheap foods, drugs/cosmetics, and general merchandise items. Private labels are emphasized over national brands. Little advertising is done. This is the company planning to take on the U.S. supermarket sector, with hundreds of units poised for rollout between 2017 and 2019.

Another German supermarket chain set to enter the North American market (USA, Canada, and Mexico) is called Lidl. With around 10,000 stores, mostly in Europe, Lidl plans a modest rollout in 2017 of 100 supermarkets along the East Coast, before ramping up further expansion.

Lidl is an extreme price chopper, characterized by half-price discounts on brands and dollar-store equivalents on private labels. Its stores are radically downsized, featuring just six aisles contained within an average 21,000 square feet. It attempts to overcome any aversion to its spartan size and relatively minuscule selection by emphasizing efficiency and elimination of waste, while offering surprise displays of products at almost unbelievable discounts.

Both of these German chains hope to capitalize on the conundrums currently facing U.S. supermarkets, which continue to offer a horn-of-plenty abundance in the face of a dwindling middle class. What is their foreign solution? Smaller stores, less selection, and lower quality, but at cheaper prices. Surely this diminution of expectations is a far cry from the consumer exuberance once envisioned and championed by John Schwegmann. Indeed, if these German supermarkets have any staying power whatsoever, it’s time to say hello to an all-new era of American austerity.