Wednesday, May 24, 2017

Store Wars

German discount chains taking on Wal-Mart for grocery dominance. 

Going head to head with Wal-Mart Stores for their core food business would seem a daunting task, but two European chains are preparing to just that.

At the Bentonville, Arkansas headquarters of the world's largest retailer, Wal-Mart executives are bracing for the arrival in the U.S. of a European grocer with a track record of disruption. Lidl, a German discount chain whose entrance into the U.K. in 1994 helped upend that country's grocery sector, says it will open 20 stores in Virginia, North Carolina and South Carolina by summer, with some arriving in the next few weeks. Two hundred or more are planned in the coming years, according to real-estate analysts, reported the Wall Street Journal. At the same time, another German discounter, Aldi, which entered the U.S. market in 1976, is fortifying its American business, with plans to spend $1.6 billion to remodel and expand 1,300 U.S. stores and build 650 more by the end of next year.

The Germans have proven to be tough competition. With nearly $100 billion in sales and about 10,000 European stores, Lidl, as well as Aldi, have eaten into large European grocers' territory and sales with low-price store brands and fresh produce. In the U.K., where Wal-Mart's local Asda chain already competes with Lidl and Aldi, Asda sales haven't grown in the past 13 consecutive quarters. Aldi and Lidl now command 12% of the British market, growing steadily while Asda, Tesco PLC and other local grocers' shares have fallen

Wal-Mart executives have been laying the groundwork to compete, working to hone store-brand product selection, lower some prices and get the basics right, like speeding up checkout lines, its chief executive, Doug McMillon, said in an interview last month. Wal-Mart stores need to be as convenient as possible to compete with discount retailers, said Mr. McMillon. To that end, the company is testing a system that lets shoppers scan products with a smartphone while shopping to bypass registers, starting to add express lines at the pharmacy and money-order counters, and offering a pick and pack service that delivers grocery orders directly to shoppers’ cars.

Also, beginning in February, Wal-Mart ratcheted up pressure on their suppliers, cutting in half the MABD (must arrive by date) window from four days to two, working to “streamline its supply chain and cut costs.” These grocery giants know better than most that to compete effectively and win the “store wars,” they must squeeze out inefficiency from their distribution networks. More than ever, supply chain efficiency is king.

Kirk Shearer

800-989-0054 x103

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