Lidl and Aldi push into city centers

German discounters are working their way into city centers. At the end of September, Aldi Nord opened a new store in the inner city of Essen on the ground floor of a former Kaufhof department store in the immediate vicinity of the main railway station. The 950 square meter store offers space for the Aldi standard store concept and is directly connected to the transport hub via the underground station. The Essen store is the third revitalized inner-city building complex within the last two years where Aldi has launched its discount concept as an anchor tenant. According to the discounter, it is in ‘constructive talks’ with other department stores and landlords of former department stores across Germany to develop similar projects in the future.

Channel rival Lidl also announced that it would open two new inner-city stores in Berlin by the end of the year, on the ground floors of Galeria department stores. Thanks to the existing space, the discounter will also be able to offer its standard range of around 4,300 individual items here, according to the company.

Urban locations that fit the standardized concepts of German discounters are rare. According to Aldi, the smallest sales areas for the standard sales concept are 800 square meters.

Lidl and Aldi have been testing small-area concepts abroad for the past five years, but so far without a clear signal for a national rollout. In 2019, Lidl launched its small-area concept for city locations in Munich, but has not yet replicated the format. Aldi UK opened its ‘Aldi Local’ concept store in London – also in 2019 – and has now reached a dozen locations in the capital. At the time, the retailer was adamant that the new branding was not a move into the convenience segment. The pilot store has 300 fewer items than a standard Aldi and no ‘Special Buys’ section for non-food promotions. In Australia, Aldi has developed its own corner store concept. Since its launch in 2021, the number of stores has been half a dozen.

According to industry sources, high rents in city centers and inefficient logistics are the main financial barriers to successful expansion. From a commercial perspective, the lack of convenience-oriented food-to-go ranges and small baskets makes it difficult for discounters to achieve the necessary space productivity to make money in these locations. In addition, uniform national pricing prevents both Aldi and Lidl from exploiting margin opportunities for the added value of proximity and convenience shopping.