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German grocer Lidl scales back plan for Philly store amid U.S. expansion’s shaky start

The move comes as Lidl rethinks its one-size-fits-all approach to the U.S. market that had called for blanketing big swaths of the country with near identical stores to peddle deeply discounted groceries from its private-label brands.

The Lidl store at 1107 W. Landis Ave. in Vineland, NJ
The Lidl store at 1107 W. Landis Ave. in Vineland, NJRead moreELIZABETH ROBERTSON / Staff Photographer

German supermarket chain Lidl is downsizing its planned store on the only Philadelphia property it's confirmed as having purchased, as it pulls back on what had been an aggressive U.S. expansion strategy that's gotten off to a rocky start.

The company's U.S. unit, based in Arlington, Va., was issued a permit earlier this month to open a 29,136-square-foot store in Port Richmond on Butler Street near Aramingo Avenue, more than 7,000 square feet smaller than an original permit for the site from 2016, according to the  Department of Licenses and Inspections.

The move comes as Lidl rethinks a one-size-fits-all approach to the U.S. market that had called for blanketing big swaths of the country with near-identical stores to sell deeply discounted groceries under its private-label brands.

Its stores closest to Philadelphia currently in operation are in Middletown, Del., and Vineland, N.J.

"Now we have more flexible criteria, which allows us to be more tailored in how we approach the different sites we're looking at," Lidl U.S. spokesperson Will Harwood said Thursday.

Lidl opened its first stores in Virginia, North Carolina, and South Carolina in June 2017, with shelves filled with merchandise from in-house labels priced to dramatically undercut competing grocers, a model pioneered in the United States by competing German supermarket chain Aldi.

Before opening those first stores, the real-estate criteria on Lidl's website indicated an interest in buying sites that could accommodate stores of 36,000 square feet, about twice as big as a typical branch of Aldi, but only about half the size of a standard supermarket. The company's website now says it is also seeking opportunities to lease, rather than buy, properties of 15,000 to 25,000 square feet.

Lidl has opened 53 stores in six states, all of them consistent with its 36,000-square-foot template. But the store count lags far behind the 100 that Lidl officials had said they planned to have in operation within a year of its first openings last spring.

Klaus Gehrig, chief executive of Lidl's parent, the Schwarz Group, called the chain's U.S. rollout  a "catastrophe" in a January article from German business magazine Manager, which faulted the company's site selection team for buying overly large sites in carelessly chosen locations and paying too much for them.

Last month, the company appointed its former Sweden head, Johannes Fieber, to lead its U.S. operations, replacing Brendan Proctor, who had overseen the early stages of expansion.

Amid this turmoil, the chain's U.S. sales haven't been sufficient to support the large stores it's been building here, said Bill Bishop, cofounder of food-retailing consultancy Brick Meets Click in Barrington, Ill.

"They weren't achieving the break-even level of sales they needed, so it's no surprise they're shrinking the stores," he said.

So far, the only Philadelphia property that Lidl's U.S. unit is documented in city records as having purchased is the two-parcel site covering nearly four acres at 2270 and 2300 E. Butler St. in Port Richmond, for which it paid $2.88 million in June 2016. The site has been cleared for construction, but no work has begun there.

Developer Bart Blatstein has also said that a Lidl store is planned on land he owns in South Philadelphia at the corner of Reed Street and  Christopher Columbus Boulevard, part of the large Delaware River waterfront parcel where a Foxwoods casino had once been planned.

Other planned Philadelphia-area locations previously disclosed in news reports include Warminster (at the site of a former Pathmark supermarket on York Road) and the Cumberland County, N.J., city of Millville (on an underdeveloped lot near Union Crossing Boulevard and Second Street).

Visible progress has also been made on a store in Ridley Township, at the site of a former Pathmark on MacDade Boulevard.

Bishop said he expects the pace of store openings to pick up once the company has finished refining its new approach to the U.S. market.

"What you're seeing here is a willingness now, perhaps grudgingly, to adjust strategy," he said. "While there was a pause, they're getting ready to put the pedal back to the metal."