In the U.S., Lidl stores are getting smaller.
The Germany-based discount grocer, known formally as Lidl Dienstleistung GmbH & Co. KG, appears to be planning stores of between 15,000 and 25,000 square feet as well as others of about 36,000 square feet, according to requirements posted on the web page the grocer maintains to solicit potential sites for new U.S. stores.
At the time of its first store openings in June, Lidl had a list of "prototype site criteria" on its website, which included the 36,000-square-foot figure. Since then, the grocer has added a list of "leased site criteria," which cites the range for the smaller store layout. The smaller stores are also supposed to be within 2 miles of a "high population density" area instead of the 3 miles proximity required for the larger store format.
Lidl did not respond to repeated requests for comment on this new "leased site criteria" or when they were published. The company also declined to respond to inquiries about its expansion plans in the U.S.
The reduced store size would make Lidl's U.S. stores roughly the same size as those that Aldi (Süd) GmbH & Co., another German discount grocery store focused on private-label products, operates in the U.S. For new stores, Aldi seeks lots capable of hosting stores of about 22,000 square feet, according to criteria posted on its website.
Provided Lidl uses the new design, the new stores would be closer in size to the ones it operates in Europe, said David Livingston, a Wisconsin-based supermarket research consultant.
"They are sticking to what they know," he told S&P Global Market Intelligence in a telephone interview. "They don't quite know what to do with all the extra space [in the larger stores Lidl has opened in the United States] and in this competitive environment, there is no room for mistakes or experimenting."
'Model isn't working'
In the months following Lidl's first store openings in June, analysts have scrutinized the grocer's approach to competing in the American market. In July, analysts at Bernstein said Lidl's store format was significantly larger than the small, efficient stores the company operates in Europe, consequently posing less of a threat to Wal-Mart Stores Inc., Aldi and other existing U.S. grocers than they first feared.
Both Livingston and the Bernstein analysts have also argued that Lidl has expanded too quickly, forcing the chain to buy or lease whatever store sites it can easily find instead of focusing on finding high-visibility locations.
"The model isn't working," the Bernstein analysts wrote in a research note published in September.
Earlier this year, Lidl said it plans to open about 100 stores in the U.S. by summer 2018.
In recent weeks, Lidl has also walked away from plans to build stores in small towns in multiple states, according to individuals involved in the transactions and local news reports.
In East Lampeter Township in southeastern Pennsylvania, the chain withdrew plans to build a store this fall after being awarded a building permit in April, the Township's Planning, Zoning and Building Department confirmed to S&P Global Market Intelligence.
In another case, David Brown, a landowner and real estate agent in Staunton, Va., said the German retailer told him it was no longer interested in purchasing his property for a store. Lidl notified Brown about its decision in November after months of negotiations between the two.
"They had decided not to go into smaller markets," Brown said in a telephone interview, describing Lidl's stated reason for declining to proceed with a transaction.
Lidl also canceled plans to buy a property in Austintown Township, Ohio, in November, according to television station WFMJ. Additionally, the retailer has put plans on hold to build a store in Mantua Township, N.J., according to a Dec. 8 report from NJ.com.
To be sure, the company has continued to open stores as it has scrapped these projects. On Nov. 30, Lidl opened outlets in Goose Creek, S.C., and Fredericksburg, Va., according to a tweet from the retailer's official account.
