Dive Brief:

• Lidl this week opened a 1,000-square-foot "Express" store at its Arlington, Virginia, headquarters. The ground-floor location, which was previously devoted to storage, primarily serves company employees, but is also open to the public and features a street entrance with a Lidl Express logo.
• Lidl Express features a range of perishable and non-perishable goods, including produce, beer and wine, according to a report in the Washington Business Journal. There's also a coffee station, breakfast pastries and a limited assortment of prepared foods. The store is self-checkout only, with three dedicated stands.
• Spokesman Will Harwood told the Journal that Lidl doesn't plan to build additional Express locations, but didn't rule out the possibility of that happening eventually. He said the store is primarily meant to showcase products for company employees and to provide an additional food stop for area workers.

Dive Insight:

Lidl Express may be a one-off for the time being. But with the company emphasizing flexibility in its store development, and with grocers across the U.S. scaling down to reach high-density markets, the pint-sized location could be a valuable laboratory for the discounter going forward.

Lidl entered the U.S. two years ago with a 36,000-square-foot store model that was significantly larger than the battle-tested box that had proven so successful throughout Europe. After these "glass palaces," as Klaus Gehrig, CEO of Lidl parent company Schwarz Group, derisively called them, faltered in the U.S., Lidl opened development up to smaller footprints and a wider range of sites. The company opened a store inside the Staten Island Mall in December, and in January opened its first 25,000-square-foot store in Aberdeen, Maryland.   

Being able to scale down can help Lidl work its way into crowded markets where real estate is at a premium but foot traffic is high. With so many grocery stores dotting suburban markets across the U.S., urban markets, in particular, represent a growth opportunity for retailers.

Earlier this month, Aldi Sud debuted a city store brand called Aldi Local at a new 6,000-square-foot location in south London. The move raised the possibility of the hard discounter, which is in the midst of a five-year, $5.3 billion store makeover and expansion plan, eventually opening smaller stores in the U.S. Meanwhile, Whole Foods just opened a bodega-style store in New York City's Chelsea neighborhood, while other chains like Target, Meijer and Dollar General have debuted scaled-down stores in recent months.

With its recent acquisition of Best Market stores in the northeast, Lidl showed it's open to a variety of expansion paths. Successfully converting those locations to the discounter's exacting standards, however, is by no means guaranteed. Lidl U.S. has also shuffled the deck in the C-suite recently, appointing Aldi veteran Roman Heini as chairman earlier this month to aid CEO Johannes Fieber, who the company installed last year.

At the very least, Lidl Express provides a showroom to test new products and an opportunity for employees to move its thinking outside the office and into a live store.