arkets. At 16.7 stores per 100,000 people in the UK and 11.7 stores per 100,000 people in the US, Australia, at a ratio of 10, appears relatively understocked. According to the report, Australia has the capacity to accommodate 40 new stores per year over the next five years before reaching the same store provision (in per capita terms) to the US supermarket sector. At their peak, Coles and Woolworths were understood to have held around 75 per cent market share. However Aldi’s entrance in 2001 disrupted the duopoly. Meanwhile, Aldi’s success in Australia has piqued the interest of other international grocery chains such as Lidl and Netherlands-based retailer, Netto. Aldi has opened 360 Australian stores over the past 14 years and now owns around 10 per cent of total market share. US-based discount warehouse retailer, Costco, has also managed to carve market share in Australia. The subscription model retailer has opened seven warehouses nationally since first opening in Victoria in 2009. In total, Australia has seen 60 to 70 new supermarkets open each year for the past 15 years, with a larger proportion in the eastern states. Western Australia and South Australia are well below the national average of supermarket provision, according to CBRE, with roughly eight supermarkets per 100,000 people. Aldi plans to roll out 150 stores over the next five years, with a strong focus on these states. Aldi confirmed in October 2014 it would invest $700 million to build two distribution centres in WA and SA, and in April commenced construction of its 32,000sqm distribution centre in the SA’s Regency Park. It also began the recruitment process for around 400 staff. The first stores in SA are expected to open in early 2016. Will Lidl, won’t Lidl? Lidl, which operates nearly 10,000 stores in 26 countries, has recently quashed rumours it’s heading Down Under, stating it has no current plans for Australia. However, the retailer has been trademarking products in Australia for more than a decade and Inside Retail PREMIUM understands it is eyeing Victoria to set up a local unit. Owned by the Schwarz Group, the discount supermarket chain is the world’s fourth largest retailer, with its international operations understood to account for more than 60 per cent of total revenue. Last week, Lidl confirmed it was expanding to the US for the first time, investing more than $200 million in the rollout, with its headquarters and distribution centre planned for Arlington, Virginia, just outside of Washington, D.C. Lidl is still yet to confirm where its first US stores will be located, however, local retail analysts are flagging this move as an indication as to how it will launch in Australia. Craig Woolford, senior analyst, retail sector, Citi Research, told Inside Retail PREMIUM, he believes it will still be some time yet until Lidl sets up shop in Australia. “An immediate priority is probably more likely to be a market like the US. There’s a good chance Lidl will open in Australia one day, but I don’t think it’s likely to happen within the next three years,” Woolford said. “If a retailer wants to open in Australia in the grocery industry they need a DC, and if you’re going to set up a DC that takes time and there’s no indication that they have even started on that front.” Lidl follows a similar ‘no frills’ approach with its products and offering to Aldi, and its stores are understood to operate on a similar footprint, which is generally around a third of the size of a full line Coles or Woolworths supermarket. Lidl’s offering is predominately made up of private label products, but also offers products outside of the grocery space, such as appliances, stationery, toys, general merchandise, and apparel including basic shoes and pyjamas. This broad range makes Lidl a competitor to not only supermarkets in Australia, but also discount department store chains such as Kmart and The Reject Shop. Gary Mortimer, senior lecturer at QUT Business School, predicts the market will be given more of an indication on Lidl’s arrival towards the end of the year, and suggests Lidl will likely set up its operations by early 2016. Mortimer said continued talk of its arrival may encourage Lidl to move quicker than expected in a bid to lock down key suppliers, distribution channels, and warehouses before local competitors can negotiate or extend existing contracts. “As a business, you’re not going to undertake trademarking work, and allegedly enter into negotiations with suppliers or logistics suppliers unless you’re serious about entering the country,” Mortimer said. “I think what Lidl might be concerned about is now that it’s out there, if they don’t move ahead quickly with Australia they may miss this opportunity. One of the challenges Australia presents, and Aldi raised in this in their submission to the Productivity Commission in 2011, is the power of the majors. Coles and Woolworths have the ability to lock away suppliers, they have the ability lock down sites, and that limits others, and initially it was limiting Aldi’s opportunities in Australia.” In an effort to combat the discounters, Mortimer said Woolworths and Coles should not position on price, and instead leverage services that the discounters don’t offer. “They need to be offering services and going to market saying, ‘we’re not a discounter and we actually offer more than what the discounters do offer’, like their new store concepts that bring another level of theatre to supermarket retail that we just don’t see being done by the discount supermarkets.” Five-year predictions CBRE expects over the next five years an increase in the number of supermarkets in the CBDs, because store sizes are smaller and achieve higher store productivity than supermarkets in shopping centres (32 per cent higher than regional and sub-regional centres; 37 per cent higher than neighbourhood centres in 2014). This increased presence of supermarkets in the CBD is also expected to be supported by the supply of apartments in Australia’s major CBDs, particular in Sydney and Melbourne, over the next five years. Mortimer said Woolworths has indicated its intentions to leverage its convenience/metro model, which has worked for UK supermarket giant, Tesco. He added that IGA should also shifts its focus on smaller, convenience style formats. “At the moment, as you watch this market polarise between the big two at the top and the two discounters at the other end, IGA is quite exposed in the middle. They have positioned themselves around price matching and that’s a risky strategy. “[IGA] should scale back from the big format stores and look at those community hubs and small high street locations and become the convenience store for the community. They’re not going to be able to match the prices of Woolworths and Coles, and they certainly won’t be able to match the prices of Lidl and Aldi.”