Daily Management Review

U.S. Warned Not To Upset Global Growth By G7 Finance Chiefs


05/13/2017




U.S. Warned Not To Upset Global Growth By G7 Finance Chiefs
The stakes for American grocery chain operators who have been caught in an intense price war would be raised as the German discount supermarket chain Lidl is set to open its first set of U.S. stores this summer.
 
With plans to opening up 80 stores in the United States within the first year of making an entry in to the market with its first 20 U.S. stores in North Carolina, South Carolina and Virginia, the company had said while announcing its plans in February.
 
Vendors have bene forced to undercut rivals by 15 percent by Wal-Mart Stores Inc which is running price tests in 11 states, and Lidl's entry comes at a time when this price war between the retailers are getting tougher. Analysts said that to regain its title as the low-price leader, the world's biggest retailer is expected to spend about $6 billion.
 
Aiming for prices 21 percent below its U.S. competition and is aggressively expanding its presence is another rival, German discounter Aldi Inc.
 
By hurting incumbents like Tesco Plc and ASDA, the British supermarket arm of Wal-Mart, both Lidl and Aldi have already upended Britain's grocery retail market.
 
Germany's privately held Schwarz Group owns Lidl (which rhymes with "needle") and the company now operates more than 10,000 stores in 27 countries.
 
At a New York press event on Tuesday, Lidl's U.S. expansion plans will be addressed by the German chain's U.S. CEO, Brendan Proctor.
 
In the eastern U.S. states of Delaware, Georgia, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina and Virginia, the company is hiring workers in 38 cities, according to the company's website.
 
"The growth of Aldi and Lidl will require existing U.S. grocery retailers to start asking themselves how they can do things differently to control costs – from marketing and merchandising to operations and logistics," Bill Bishop, co-founder of retail consultancy Bricks Meets Clicks, said in an interview on Friday.
 
According to a recent note by retail think tank Fung Global Retail and Technology, assuming it opens just under 100 stores per year, Lidl is expected to post U.S. sales of roughly $1 billion in 2018, $2 billion in 2019 and $4 billion 2020.
 
The report said that U.S. grocery chains like SuperValu Inc, which posted sales of $4.8 billion, Sprouts Farmers Market with $4.3 billion in sales last year and Ingles market, which had revenue of $3.2 billion in 2016 would then be the closest competitors for the company in terms of sale and revenues anticipated by that period.
 
While the retailer has opened three distribution centers in Maryland, North Carolina and Virginia, Lidl is eyeing more than 330 U.S stores by 2020, analyst estimates suggest.
 
On the other hand, German grocery chain Aldi Inc. is already in the U.S. price war is plans to use its own game – low prices for beat Wal Mart, the world's biggest retailer.
 
Aldi’s prices are 21 percent lower than its lowest-priced rivals, including Wal-Mart Stores Inc., said its Chief Executive Jason Hart based on Aldi’s internal studies.
 
(Source:www.reuters.com) 






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