Kantar Retail: Lidl to generate nearly $700 million in sales by the end of 2018
Lidl makes its long-awaited U.S. debut on June 15, opening the first three of 20 stores it plans to open this summer across Virginia, North Carolina and South Carolina. Mike Paglia, retail director of Kantan Retail, offers the following insights on the grocer's prospects in the United States:
"Lidl will look to price its assortment at up to 50% less than other supermarkets in the United States. While this figure is based on a comparison of comparable products sold at leading national retail grocery stores, this should be taken with a grain of salt. However, in a Kantar Retail price survey we conducted in the UK, we found that Lidl was on average 15% cheaper than its main competitor, Asda. This price difference should provide a sense of the expected price gap in the US.
The grocer is making a point of separating itself from its competition (Aldi) by building 20,000-sq.-ft. mini-supermarkets. By offering a bigger shopping experience than other discount grocers, Lidl is setting itself up to be the main destination for shoppers seeking a fill-in trip, but also a destination for those looking to save money on their shopping trip.
Health and sustainability will be key features of the assortment, as private label items will be free of trans fats, added MSG and certified synthetic colors. 90% of the assortment will be private label and 85% of the assortment will be sourced from within the U.S., suggesting the retailer is seeking to appeal to shoppers seeking “better for you” items.
Contrary to popular misconceptions, Lidl’s core shoppers will be positioned more towards a midmarket shopper, which is consistent with the grocer’s approach in the U.K. and other markets.
Lidl plans to have 100 stores open across the East Coast by 2018, aligning tightly with our estimates of having 120 stores in the U.S. by the end of 2018.
By 2023, Kantar Retail expects the grocer to have 630 stores open across the United States, with a focus on suburban metro markets at the onset.
We expect the retailer to generate nearly $700 million in sales by the end of 2018, growing to $8.8 billion in 2023 as customers begin to gravitate away from other grocers."
Robots & Retail: Going beyond the supply chain
Retail has historically been one of the most technically advanced industries, particularly in warehouses and the last mile. The industry is no stranger to automation as fast and efficient supply chains are the foundation of a strong retail operation in a competitive environment. Over the past few decades, increasing automation at the supply chain level has directly impacted both revenue and the bottom line.
The growth of warehouse and factory automation correlates with the pressure to innovate for retailers, especially as giants like Amazon continue to win over more and more market share. At the same time, bringing extra robots into the labor force is not the way to stay afloat in today’s digitally dominated retail landscape.
While substituting workers with robots can increase efficiency for retailers, this advancement is hampered when the back office, plagued by slow manually repetitive tasks, acts as a bottleneck for the bigger business. This area of the business is effectively the nerve center of the entire retail operation, therefore it must be agile, fast and operationally efficient. Conversely, legacy software systems keep the back office working at a snail’s pace. Outdated technology and impractical processes are holding back retail organizations from competing with leaner online merchants.
In order to remain competitive in the changing retail industry, companies must bring robots into white-collar roles – not warehouse work.
Learning from the Competition
Retailers can learn a great deal by looking to their fiercest rivals. Online entities like Jet, Overstock, eBay and Amazon are turning retail on its head, not just because of their warehouse or supply chain technology, but due to their immediate transactions and sophisticated yet smooth user interface. These retailers create systems that can be adapted to every individual user. Equally, that mind-set can be applied to a retail back office, where the end user is a CFO or regional manager, rather than the consumer. Instead of rushing to stock shelves with products by hacking the supply chain, retailers should take a leaf from the Amazon playbook and prioritize making their internal processes more streamlined.
Automating the numerous menial tasks that go into financial, HR, legal, and IT processes in the back office is the first step to developing a modern retail operation. Not only will this benefit the broader business, but employees will be able to cut out the before mentioned rules-based, repetitive tasks that make up so much of their day, opting to take on more strategic, valuable tasks.
This massive shift is slated to drive businesses ahead in the same sense that the second industrial revolution catalyzed manufacturing, eliminating the grueling labor and health hazards suffered by early factory workers.
The CIO as a Driving Force
The next phase of retail is in the hands of CIOs. The onus is on them to inject process robotics into new sectors of the business and speed up the overall pace of innovation.
Historically, retail CIOs focused innovation efforts on the supply chain, not going beyond the ERP level because that was where the bulk of repetitive work was concentrated. Now, more than ever, to alleviate hold-ups across the back office, CIOs must look beyond the supply chain to see that they are on the cusp of a new opportunity that will drastically streamline operations, without ever setting foot in a warehouse.
By automating and customizing the millions of critical processes that comprise the business, CIOs can prepare for an entirely new period of growth.
The Future of Work
White-collar work is on the verge of a big change; it won’t look anything like it does now in a few years. Driven by technological progress, the workforce is continuing on its longstanding path towards higher skill levels and even higher education, ultimately bringing employees more job satisfaction.
Contrary to popular belief, we are not sliding toward a jobless future where businesses are run by mechanical workers. Instead, the workplaces of the future will be made up revolutionary technology that releases highly skilled professionals from the back office to enable ground-breaking productivity levels. Not only will automation enable retailers to compete with Internet behemoths, but it will increase employee morale, and above all free up staff at all levels to focus on what truly matters: improving the customer experience.
Devin Gharibian-Saki is chief solution officer of Redwood Software.
Update on Walgreens-Rite Aid merger
There's been another development in the planned Walgreens Boot Alliance and Rite Aid merger.
Even as media reports circulated Friday that the Federal Trade Commission was preparing to block the merger between Walgreens Boots Alliance and Rite Aid, one of the merger’s key players took steps to help strengthen the case to approve it. According to a Securities and Exchange Commission filing, Fred's Pharmacy secured additional financing Friday to meet its obligation of acquiring as many as 1,200 Rite Aid stores that are expected to be divested as part of the merger.
The company entered into a second amended and restated commitment letter with its lenders that increases the committed financing by $450 million, from $1.2 billion to $1.65 billion; extends the initial outside commitment date to July 31, 2017; and permits Fred's to further extend the outside commitment date to Oct. 31, 2017.
Another amended and restated commitment letter increases financing by $100 million, from $450 million to $550 million with similar extensions.
"Financing made available under the Second Amended and Restated ABL Commitment Letter and the Amended and Restated Term Loan Commitment Letter will be used to fund the company’s proposed acquisition from Rite Aid of assets, including up to 1,200 retail stores, certain intellectual property, corporate infrastructure and distribution centers," Fred's CFO and executive VP Rick Hans said.