Lidl USA: a challenge, in time

Last week's announcement from Lidl confirming that its first US stores will open in June took the anticipation and excitement surrounding its launch to a whole new level. However, it could be several years before the retailer's true impacts are seen.

Another disruptive influence on the market

Lidl's anticipated entry into the market is viewed widely as an added source of disruption to trading as normal. It sits alongside numerous other forces shaping grocery retailing in the US, including

• The accelerating roll-out of ecommerce
• The countless innovations coming from Amazon
• Walmart's significant price investments
• The blurring of retail and foodservice
• The growing presence of healthier and cleaner products in-store

And we should also not forget Aldi, which along with Lidl, is shining a very bright spotlight on the hard discount retail model.

Retailers adjusting their strategies ahead of Lidl's entry

While there is no doubt that Lidl's entry into the market will have an impact, we must consider what this could look like in the short-term, once the initial stores have opened. Already we have seen retailers start to sharpen their pricing strategies, shifting investments towards every day low pricing. And there may be more to come on this given Lidl's announcement last week that it will be up to 50% cheaper than conventional supermarkets on some items. Retailers have also been investing in their private brands; for many, this the key plank of their defensive strategy.

300 discount stores are not going to shift the market

While these are smart moves which will help enhance value perceptions among their shoppers, they might be premature if the goal is to stop Lidl in its tracks. Aldi's progress and development in the US provides some useful lessons. It has grown to over 1,600 stores, but only in the last five years has it been considered a truly national operator. It is worth noting, however, that the fragmented nature of the US market means you don't need national scale to impact some very large regional operators. For many retailers, Aldi has brought a new level of price competition.

However, even growing to be a $13bn business has not led to the fierce price wars which Lidl's entry have been forecast to trigger. In the UK, it took over 20 years before 'Lidl' and 'disruptor' were mentioned in the same sentence. While the first 20 stores, and the first 100 stores, from Lidl in the US will be highly interesting, we'll have to wait a little longer before we consider its longer-term prospects.

Limiting smaller format opportunities for others

For an immediate impact, one area to watch is site acquisition. With a preference for new sites, Lidl is a highly active competitor for new store space. Several retailers are looking to develop smaller supermarkets, and Lidl's determination to build a significant business in the US, along with Aldi's on-going expansion, could make it difficult for them to achieve their format goals.

Look to 2020 to see the real impact

As the first stores are opened, we'll be looking to make an early assessment on its prospects. We'll be looking to see how the retailer has adapted its approach for the US market, the adjustments it will make as it builds in learnings from the initial stores and how competitors will be responding at the local level. However, we may have to wait until 2020 before we are able to make a call on whether it has the potential to shift the wider market.

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This article originally appeared on Retail Analysis.