Supermarkets need to prepare themselves for the latest competitive threat
Thursday 24 May 2018 Author: James Crux

Lidl may be planning to enter the online grocery delivery market in a fresh assault against the UK’s largest supermarket chains, according to media reports. The German discounter has registered the name ‘Lidl Digital Logistics’ at Companies House and could be targeting the grocery deliveries arena.

Because they operate a low cost model, discount companies such as Lidl have hitherto avoided e-commerce, preferring to invest in keeping prices low in store rather than incurring the added costs of picking, packing and delivering products to customers.

However, the rise in third party delivery services is opening doors for more supermarkets, enabling them to cater to growing demand for online grocery without the need for heavy investment in systems and infrastructure.

This is the first time Lidl has signalled an interest in moving online and the move would represent a significant new threat to the growing online operations of Tesco (TSCO) and J Sainsbury (SBRY).

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Retail industry watchers were left stunned by the news in April that J Sainsbury and Asda wanted to combine forces in a supermarkets super-merger. Against a backdrop of the relentless rise of online shopping and Amazon, and the threat from Lidl and Aldi, J Sainsbury plans to acquire Asda from Walmart in a deal that will see the US retail behemoth become the enlarged entity’s biggest shareholder with a 42% stake.

The latest grocery market share figures from Kantar Worldpanel (1 May), covering the 12 weeks to 22 April, showed disruptors Aldi and Lidl growing their market shares to 7.3% and 5.4% respectively.

The data revealed market shares of 15.9% and 15.5% for J Sainsbury and Asda respectively, both down year-on-year, while Tesco maintained its market leadership at 27.6%.

In the sector’s other major development, shares in online grocer and e-commerce technology licensor Ocado (OCDO) have soared after securing a partnership deal with US grocer Kroger, giving it a foothold in the vast American groceries market.

Following on from similar deals to provide the Ocado Smart Platform to Canada’s Sobey’s, France’s Groupe Casino and Sweden’s ICA, Ocado will license out its technology for Kroger’s exclusive use in the US, where it is a market leader with sales of $122bn in fiscal 2017.

Ocado, which powers Morrison’s (MRW) online delivery service in the UK, believes Kroger is the company best positioned to win in US grocery and having inked this deal, it will now call off talks with other US-based retailers. (JC)

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