Dive Brief:

• Lidl U.S. announced on Tuesday that  it will exclusively feature a new fashion collection by supermodel/fashion designer Heidi Klum, launching later this year in stores in Europe and the U.S. according to a press release emailed to Retail Dive.

• The no-frills retailer, which like Klum hails from Germany, describes the collection as “high-end, yet affordable.” In addition to the Klum collection, Lidl will host other 'Lidl Fashion Weeks,’ which will feature various fashion collections in stores at certain times throughout the year, the company said.

• Lidl, which operates about 10,000 stores in 27 countries throughout Europe, recently announced it will open its first nine stores in cities along the east coast of the U.S. on June 15.

Dive Insight:

Redoubled competition from no-frills grocery companies hailing from Germany — fast-growing Aldi and its Trader Joe’s sibling, and U.S. newcomer Lidl — poses a dramatic threat to U.S. grocery stores, particularly Walmart, which depends on grocery for more than half of its revenue.

Lidl poses a problem especially for Walmart because it sells not just groceries, but also home goods and apparel, according to Howard Davidowitz, chairman of New York retail consulting and investment banking firm Davidowitz & Associates.

Both Lidl and Aldi run their stores with limited merchandising, store brands and bottom-barrel prices, an approach that defies the common notion that the U.S. consumer wants choice — and their prices are as much as a third lower than many rivals. “Aldi and Lidl really know what the hell they’re doing, and Lidl is even more of a direct threat to Walmart than Aldi and Trader Joe’s,” he said. “Their stores are bigger [than Aldi and Trader Joe’s], and they have all kinds of other merchandise.”

Nick Egelanian, president of retail real estate consulting firm SiteWorks, says Walmart is distracted by Amazon in particular and digital sales more generally, and doesn’t seem to realize the threat from the German companies, which have successfully disrupted retail in Europe, igniting a bruising price war in the U.K. “If I ran Walmart, I would be much more concerned about [Lidl coming to America] than about Amazon,” Egelanian told Retail Dive last year.

The tie-up with Klum is also a challenge to Target, which has reasserted its merchandising differentiation (innovated to compete with Walmart on more than price) with similar partnerships with designers for its home goods and apparel. It’s most recent collaborations include a furniture offering from mid-century design brand Dwell and a limited-edition fashion collection from designer Victoria Beckham.

“Lidl is known for making quality products at affordable prices and I’m proud to partner with them on this fashion collaboration,” Klum said in a statement emailed to Retail Dive. “I had so much fun designing the pieces in this collection and can’t wait for you to see it. I hope you love it as much as I do!"