Dive Brief:

• Lidl will expand its online ordering and delivery pilot with Shipt to include three additional markets in North Carolina and South Carolina, according to a news release. The discounter, which launched online shopping in the Greenville, South Carolina market back in October, will begin serving the new markets on Dec. 7.
• In North Carolina, Lidl will provide online ordering and fulfillment in Raleigh, Winston Salem and part of Charlotte. In South Carolina, it’s expanding to the Spartanburg, Rock Hill and Indian Land metro communities. All told, Lidl’s online service will reach 500,000 households.
• To promote the service, Shipt is discounting its annual membership from $99 to $49 for shoppers who sign up ahead of Dec. 7.

Dive Insight:

Lidl clearly likes what its seeing from its online ordering pilot so far. The discounter launched with Shipt in Greensboro, South Carolina in late October — a somewhat surprising move, considering company executives dismissed online shopping pre-opening, stating they wanted to focus on the store experience first.

That was, of course, before Amazon bought Whole Foods and dozens of major chains around the country put their online shopping ambitions into overdrive. Instacart, Shipt’s key competitor, has grown from just 30 markets at the beginning of this year to more than 150. According to Packaged Facts, online grocery shopping accounts for a small percentage of transactions now, but sales are expected to grow 27% per year over the next five years.

Profiting from online fulfillment is very difficult right now, but will Lidl be able to gain new customers through the service? It depends on how attractive its proposition is to shoppers. The stores haven’t been open very long, and foot traffic hasn’t been stellar in these first five months, judging by traffic data. Lidl is also going up against players like Kroger and Walmart that are aggressively expanding and promoting their online ordering services.

Still, Lidl does have an attractive price proposition, and its nonfoods selection could gain some traction during the holiday season.

Industry analysts have been critical of Lidl’s assortment and promotions to date. Some say it needs to lighten up on its nonfoods selection, while others point out it's focusing too much on pantry items where it isn’t price competitive.

Meanwhile, as the company expands into new territories — it just recently opened its first store in New Jersey — some observers are questioning Lidl’s real estate choices.

“Unfortunately, in some areas they’re not on Main Street, they’re not even on outer Main Street,” Jeff Metzger, publisher of Food World, a trade publication that covers the Mid-Atlantic region, recently told Food Dive. “They’ve got some tertiary locations. They’re all over the place in their store selection”

There seems to be a consensus among industry observers that the company needs to change things up. Lidl’s e-commerce expansion may be an acknowledgement of that fact. The discounter has also altered its produce promotions, offering discounts on select items throughout the week as opposed to twice a week, as Winsight Grocery Business recently reported.

Lidl has touted its ability to quickly adapt to market conditions, so the company may yet find its footing. Sources have also told Food Dive that the discounter’s appeal could be more of a slow burn as shoppers get used to its unique brands and price proposition. A recent survey by consulting firm Oliver Wyman found that Lidl struggles with consumer awareness, but gets very high marks from existing customers.

So while it's clear the company has some work to do, it’s way too early to count Lidl out.