Wednesday, May 18, 2022
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Grocer Lidl bets on keeping it simple

A confession: Every once in a while, I go into the condiment aisle at my supermarket and stare at all the mustards. Only after I curse and bless America and its abundance of choice do I begin counting. All the brands, all the sizes, every SKU. The latest count at my Harris Teeter: Ninety-four.

At the new Lidl, it’s just seven.

There is a grand and important battle unfolding this summer in North Carolina’s supermarkets. Change is afoot. The competition is getting tougher — i.e. Publix and Wegmans — and also more diverse. There is pressure from below, as discount grocer Lidl begins its Teutonic expansion up and down the Atlantic seaboard, and from above, now that Amazon is about to buy Whole Foods and direct its e-commerce expertise toward the sale of organic greens.

Except for the very wealthy, grocery shopping is unavoidable, and where and how we shop says a lot about the value and order we assign to time, money, quality and status.

And it matters to the economy. There are still two largish independent supermarket chains based in North Carolina: Lowes Foods, based in Winston-Salem, and Ingles, based in Asheville. Harris Teeter is now part of Kroger, and The Fresh Market’s new private-equity owners are trying to quickly turn it into a full-service supermarket. Regardless of ownership, these retailers employ thousands, pay taxes and are often the lifeblood of shopping centers — they are called anchor tenants for a reason.

I’m not suggesting that we will witness the death of the big American supermarket in the next five years, but the ground is shifting. Only 2% of U.S. grocery shopping is digital. The runway is long, but the water only flows one way. Think back to bookstores, the first retail industry that Amazon gutted. Many people believed books were web-resistant, protected by the physical pleasure of browsing. They were wrong. I was wrong. People still read, and they still browse (or an app makes recommendations for them), but for the most part, big bookstores are a thing of the past.

You can imagine a similar scenario with supermarkets. It’s tempting to think that our love of squeezing tomatoes will triumph over click and shop. But let’s not kid ourselves: Technology will win. It may not win for all shoppers all the time. But supermarkets — like bookstores — are built on scale. At some point, the critical mass is gone and the whole thing topples.

That’s why the Lidl invasion is so interesting. It’s counter-intuitive. Give shoppers less choice, virtually no national brands, make them bring their own bags, and then hope that simplicity and price win out. Unlike most peers, Lidl isn’t pushing into e-commerce, attempting to out-Amazon Amazon.

While some parts of North Carolina are starved for supermarkets, at some point there is going to be a shakeout — too many stores with too much fixed cost chasing too few customers.

Speaking with analysts a few months back, Kroger CEO Rodney McMullen was peppered with questions about Lidl. He thrusted and parried (Kroger is now suing Lidl over a trademark infringement), and suggested that American consumers — unlike their European counterparts — don’t cotton to limits on choice for what they buy and where and how they buy it.

“The customer wants to shop on their terms, the way they want to, but they still, for certain items, like to come into a physical store because they like to interact with people. And we think it’s incredibly important to continue to have a strong physical presence, but it’s the sum of all parts rather than just each one individually.”

In other words: May the best mustard win.

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