Lidl

I’m just going to come out and say it.  I think Lidl will fail within 5 years.  Oh, they might not shut down their stores because of pride but they will be a failure.  Why do I say this?

First they plan on opening about 100 stores without ever testing just one in the USA to see if it works.  It’s taken Wegmans about 100 years and they don’t even have 100 stores yet.  Too many stores in too short of time.  They have a huge learning curve.

Second, where are they going to find qualified employees?  Unless they are going to be paying people $20 an hour they will have to settle for the low wage knuckleheads the float from one retail job to another.  As for managers, only unqualified unhappy gullible managers will leave their jobs to go work for an unproven concept.   Their current employers are probably happy Lidl has come along and hired them.  This saves them the trouble of firing them.

Going to a new country and opening up a new concept is never easy.  Sure Lidl competes well with Aldi in Europe but Aldi has a 40 year head start in the USA, is well accepted, and has strong name recognition.  I read a lot of articles about what Lidl “thinks” rather than what Lidl “knows.”  Whole Foods is a grocery chain that has “revolutionized” the industry and since they have gone to the U.K., they only opened 9 stores.

Lidl is smart to open its first stores where we have some of our weakest competitors.  The southeast coast is littered with failing chains like Bi-Lo, Lowes, Piggly Wiggly, Food Lion, The Fresh Market, and Earth Fare to name a few.  There are plenty of sterile conventional chains like Giant, Shoppers, Farm Fresh and Safeway.  Walmart is looking tired but they still over-perform compared to most grocers. However Publix and Wegmans are moving in.  You can’t open100 stores in a year and take site location seriously.  No matter how much homework and research they do, they have no analog to go by.

Walmart has flopped and failed going into a new country.  We saw Target crash and burn in Canada in about one year.   Delhaize opened a chain of Bottom Dollar stores that failed.  Tesco opened hundreds of Fresh & Easy stores on the west coast that failed.   Haggen’s was the laughing stock of the industry two years ago when they announced that they were purchasing 146 Albertsons stores.   And we are still laughing because they soon failed. Meijer has invested millions in the failing Fresh Thyme chain and they keep building more stores.  Going zero to 100 usually doesn’t work in retail.  You probably wouldn’t get the Shark Tank to invest in a concept that has never been tested. 

You are going to be reading a lot of articles and blogs about how great Lidl will do.  The reason for this is that reporters are not business people.  And consultant bloggers are more interested in impressing retailers with compliments in hopes of getting hired by them to do consulting.  My gut feeling is Lidl is about to learn what getting “Trumped” means.  Look for a lot of press releases saying they are “encouraged” by their first few stores and they are “exceeding” expectations.  That is grocery industry code for “we screwed up.”

The big question is what do these retailers think they know that other retailers don’t know?  The answer is nothing.  These decisions are made by human beings with human emotions.  Sometimes it’s ego or greed and sometimes it’s just ignorance and insanity.  Occasionally it’s genius.  I could be wrong about Lidl, but I’m not.  At least I hear these buildings can be easily converted into churches.