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France: Can discounting in France become as big as in Germany?

Updated: Sep 1, 2022

Discount Retail Chain Lidl (owned by German Schwarz Gruppe) represented 7% of mass retail sales in France in March. With a 7% market share in March, Lidl continues its ascent in French supermarkets. How far can hard discounting in France go? Credited together with just over 7% market share in 2016, the Lidl and Aldi discount retail brands are now close to 10%, according to the latest Kantar figures. And their weight will automatically increase in the coming months once Aldi has passed under its flag the 547 Leader Price stores bought from the Casino group.

By the end of the year, the two German discounters should therefore greatly exceed the 11% market share, or even more with growth linked to their own dynamics. Still far from Germany where the two players represent more than 30% of sales in supermarkets but little by little discounters are digging their wake in France.

"Entering the top 3 of retailers in France is impossible for them in the medium term, believes Olivier Dauvers, expert in mass retail. On the other hand, they will cross 15% within 5 years, that's a certainty."

In a sector where we are struggling to gain a few tenths of market share, Lidl is advancing at a fast pace. The discounter, which barely weighed 4.5% of the market in 2016, exceeded 7% for the first time last December. Before reaching this threshold again in March with a gain of 1.1 points compared to February.

As for Aldi Nord (privately owned), with the takeover of the Leader Price stores and their transformation which should be completed by the end of the year, we are also preparing to change dimension. Less well known than its rival, Aldi more than tripled its advertising budget in 2020 (+ 231% according to Kantar) and is now the fifth advertiser in the sector, ahead of Système U and Auchan. Lidl being third in this ranking, just behind Intermarché, but well ahead of Carrefour.

If these brands spend a lot on advertising to make a name for themselves, it is in the field that they have made a radical transformation in a few years.

"Lidl's growth can be explained first and foremost by its store base, assures Olivier Dauvers. It is fairly stable around 1,550, however the stores are getting bigger and bigger. The old ones averaged 600-800 m²., half today exceeds 1,000 m². Lidl has renovated its stores extensively. A renovated Lidl store represents a 50% increase in turnover."

Like the very large Lidl in Villetaneuse (93) which opened its doors last December. This is a former 2,200 m² Auchan supermarket that Lidl bought from the struggling brand. More beautiful and more spacious, it symbolizes the new Lidl which wants to be more attractive. And if its rather tenuous product offer has changed little in recent years, Lidl has been able to showcase them better by increasing the number of retail hits first (Monsieur Cuisine, prestigious wine fairs, offbeat sneakers to create a buzz on the internet etc. ). By attracting a more urban and affluent clientele in its points of sale, the brand has managed to retain some of them.

"Lidl has also spoken in societal debates such as the remuneration of farmers, it marked the spirits, explains Olivier Dauvers. Today it is the Lidl stand which is the most visited of the agricultural show."

From now on, we go to Lidl because we made the choice of Lidl. And not only because we have no choice.

"The hard-discount before told customers that they were poor, today it tells them that they are smart", summarizes Olivier Dauvers.

More beautiful and larger stores, a limited food offer that allows them to buy in very large quantities to have low prices, an effective policy of coup on non-food products. If the strategy is well established, will be sufficient to change dimension and become as essential as in Germany?

"It's going to be difficult, in Germany they have the history and have done this work on the image for a long time, assures Frank Rosenthal, specialist in consumer marketing. There, they had no or almost no stores. Impoverished, the customer did not feel like a "sub-consumer."

Neither drive nor e-commerce Especially in France, Lidl and Aldi remain secondary stores. Even though one in two French people now go to a Lidl store at least once a year, their shopping basket is lower than at Leclerc or Carrefour. This is explained by a more limited choice of around 1,700 SKU references against several tens of thousands in supermarkets and hypers competitors.

"If we offer more, we leave the Lidl model", explains Michel Biero, the sales director of the discount store. Lidl customers know they won't find everything in their store, just the essentials at a great price. " What is a strength today could turn out to be a weakness if these brands want to change dimension.

Like, moreover, their virtual absence from online sales channels. While drive and food e-commerce represented 10% of sales in 2020, the two discounters are absent subscribers. Aldi does not sell absolutely anything online and Lidl only has a travel site and a wine shop.

"They will have to go through the drive to change their status and they will come there," said Frank Rosenthal. Aldi already offers click and collect in Germany and the United Kingdom. Lidl only offers non food products."

Aware of having missed the boat in 2020 with the explosion of food e-commerce, Lidl nevertheless ensures that they are making progress on the subject.

"Our reflections are accelerating on the subject, assures Michel Biero. It is not too late, we have double-digit growth. A drive does not happen so quickly, you have to study the market well, it cannibalizes a little stationary, you no longer have to buy impulse when you have drives. But we are going to test things."

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