Report: Heidi Klum collection gives Lidl a boost

Dive Brief:

Clothing sales at discount retailers in the U.K. will grow a whopping 90.7% by 2022, and Heidi Klum’s range for Lidl shows why, according to a report from GlobalData Retail emailed to Retail Dive.
Lidl launched the Klum collection this year in the U.S. and the U.K.
The range has been a hit, and in the process has boosted consumer perception of Lidl and impulse buys from its customers, as well as under-cutting rival value apparel retailers on price, according to the report.

Dive Insight:

The Heidi Klum collection at Lidl demonstrates the retailer’s ability to differentiate and represents a fierce challenge to dollar stores and Walmart. The grocery and mass merchant arrived in the U.S. this year and, like fellow no-frills German grocer Aldi, is expanding.

The discount-designer tie-up was innovated by Target years ago, but has become a mainstay of fast fashion since then. "Heidi Klum’s range has been highly successful, garnering mass interest and building up expectations to the point of people queuing outside of their local Lidl this morning to be one of the first to buy designer endorsed clothing at affordable price points — something we are more familiar with seeing at Topshop or H&M, and not at a food and grocery specialist," GlobalData Senior Retail Analyst Molly Johnson-Jones wrote.

Lidl is also a grocer, with the potential for high-frequency visits that entails. The Klum apparel collection benefits from Lidl’s scale in Europe (a different story than in the U.S., where the retailer is a newcomer with a small base), and the retailer is selling items in boxes on shelves, making for minimal cleanup and less expensive supply chain costs, Johnson-Jones said. Plus, though the garments are priced below even most budget apparel retail tags, they offer higher margins to Lidl than its private label groceries do.

In the U.S., not all those benefits will accrue, considering that Lidl has a limited presence here at the moment. But Johnson-Jones describes an appealing fashion collection that could drive discovery of Lidl in the U.S.

"Aldi and Lidl really know what the hell they’re doing, and Lidl is even more of a direct threat to Walmart than Aldi," Howard Davidowitz, chairman of New York retail consulting and investment banking firm Davidowitz & Associates, has told Retail Dive. "Their stores are bigger, and they have all kinds of other merchandise."

That makes Lidl particularly worrisome for Walmart, especially since its stores are likely to be located within close physical proximity of Walmart locations in the U.S., according to Nick Egelanian, president of retail real estate consulting firm SiteWorks.

"Walmart has tended to be successful in most of what they’ve done, but Lidl is coming in with soft goods" in addition to groceries, Egelanian explained. "It’s like a new niche, and Walmart isn’t good at creating new niches. Look at their small Walmart Express stores [all of which Walmart closed]. They’re throwing their hands up and saying, 'We’re just going to the web.’ These European guys are very good, very well tested models. Lidl is going to make sense to Walmart customers."