What Can U.S. Grocers Learn From Their UK Counterparts When It Comes To Tech?

As German discount chain Lidl has been working to establish its footing as it continues its East Coast expansion, established U.S. food stores are trying to cope with the technological change from voice activation and on-demand ordering.

The e-commerce experience of UK grocers may have some lessons for their U.S. counterparts as brands across the world attempt to sort out issues associated with allowing consumers to buy what they want, where they want, how they want.

We checked in on the similarities and disparities between grocers on either side of the Atlantic with GrocerKey CEO Jeremy Neren, following his talk at market researcher Redburn’s 2017 Retail Food Conference in London last month.

GeoMarketing: What are the primary differences in the way UK grocers have experienced the challenge from e-commerce?

Jeremy Neren: Technology in the UK market has largely been led by grocers, unlike the U.S. which has been led by pure play e-commerce providers such as Peapod, Fresh Direct, and Amazon. With the market maturing far more in the UK than in the U.S., pricing competition has forced retailers to sacrifice considerable margin.

What’s the state of on-demand delivery and shop online/pick-up in-store in the UK versus the USA?

The UK market is mature, but doesn’t seem to be adopting on-demand delivery at the same rate we’ve seen in the US. E-commerce grocery adoption is far greater in the UK (roughly 7.5 percent) than in the US (3-4 percent). Many of the major UK grocery retailers have mature click & collect and/or next day delivery programs – Tesco, Sainsbury, Asda, Morrisons, Waitrose.

GrocerKey’s Jeremy Neren

Is there a difference between what UK major grocery chains and smaller independents are doing to address the issues associated with e-commerce?

The UK market is very different than the US in that the market is far more consolidated. 75 percent of the market is made up of the 5 retailers mentioned in the previous question, with the remaining 25 percent coming from major international chains (i.e.; Aldi, Lidl)

How are they dealing with the challenges differently from USA counterparts?

UK retailers are becoming far more sophisticated in terms of e-commerce fulfillment (i.e.; batch / wave picking, implementing ware rooms / dark stores), supply chain, pricing, inventory management, and technology resources.

Are there any other trends being experienced by UK grocers that have yet to hit the USA?

Consumer adoption, density, and overall industry sophistication are much higher in the UK – we will likely reach a similar state in the US around 2019/2020.

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How Discount Grocer Lidl Can Build Store Traffic Following US Launch

After experiencing a favorable introduction for its first 20 U.S. grocery stores in , German discount chain Lidl has been trying to establish its footing as it continues its East Coast expansion.

According to analysis by proximity platform inMarket, the dip in foot-traffic Lidl has seen at some of its stores in North Carolina and Virginia is afflicting others in the discount grocery space as Walmart ramped up its challenge against Amazon’s Whole Foods and Target.

Finding Traction

Lidl, which runs over 10,000 stores across 28 countries, “launched with a bang” this past June 15th, inMarket’s report notes. The company’s U.S. stores drew a decent 2.6 percent Share of Visits (SOV, as inMarket abbreviates it) on its introduction to the U.S. market.

The U.S. launch by Lidl appeared to take customers from another discount retailer BI-LO, which saw a decrease in visits from May to June, inMarket says. North Carolina- based Harris Teeter, which is a subsidiary of supermarket chain Kroger, also lost SOV in June, suggesting that consumers went to compare shopping at Lidl. (We’ve reached out to Lidl’s PR department and will update accordingly.)

Lidl saw an initial burst of store visits in the US this summer, but traffic has since declined.

But rather than cannibalizing the direct competition, inMarket points to Walmart’s gravitational pull as representing the biggest problem smaller supermarkets are facing, as the retail giant attracts about 30 percent of grocery visits.

“Many of those visits [to Walmart] are likely to involve grocery purchases,” inMarket says. “It’s interesting to note that Walmart dropped from 30 percent SOV in May to 29 percent SOV in June — perhaps as its cost-conscious shoppers went to check out Lidl. Fellow mass merch chain Target remained at from May to June at 9.3 percent SOV in these markets.”

Conquesting Reconsidered

Despite Lidl’s sudden rise, and its direct rivals’ dip in visits around the time of its debut, BI-LO, Walmart and Harris Teeter have all recovered SOV as of September, inMarket notes.

“It’s still very early for the retailer, so there’s definitely potential to turn things around,” inMarket Communications VP Dave Heinzinger tells GeoMarketing. “From our perspective, we know that location-based digital ad programs can help offline retailers drive foot traffic into stores.”

One area for Lidl US to explore is managing the digital presence of its growing network of American locations. Ensuring that consumers have the right discovery tools associated with digital presence management — nearest addresses for online searches, store hours, contact details, and reviews — could quickly expand its initial customer gains.

Heinzinger is interested to see if Lidl could make an impact by targeting competitive shoppers via smart, location-based retargeting programs. (For the record, Lidl does not employ inMarket, which relied on location data from the 50 million consumers who use the company’s partner apps).

“For example, our data shows that BI-LO and Walmart had dips in SOV during Lidl’s launch in June, while Whole Foods did not,” Heinzinger adds. “A top-line recommendation might be to focus on their strongest audience — the cost-conscious shopper — by conquesting BI-LO and Walmart shoppers through online-to-offline retargeting. They might also skip wasting dollars/impressions on uninterested Whole Foods shoppers.”

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