In retail marketing academia, as well as life in general, there is a tendency to dismiss or “poo-poo” old theories, concepts and opinions. Something that is new and trendy is seen as inherently relevant and useful. In my view this can be fallacious and dangerous. While some theories and frameworks are naturally replaced by paradigms and concepts due to advances in technology or major shifts in consumer behaviour, some retain the same resonance now as they did “all those years ago”.

Recently I was reviewing the continued progress and development of the so-called “discount retailers” such as Aldi and Lidl. Many commentators attribute their continued success and growth to the deep global recession that took place in Europe over the past decade: some argue that it is still happening in a virulent fashion.

There is evidence that such retailers, particularly Aldi, are moving away from the “hard” discount positioning strategy that has been their mantra since they were founded. “Hard” discounting reflects the focus on low prices and on brands that are private labels or are not that well known to shoppers in a particular location.

However Aldi and Lidl have made significant changes to its product range and its pricing strategy in recent years. In summary they have begun to move upmarket in an attempt to attract wealthier shoppers who traditionally have eschewed the opportunity to shop at their outlets. This might be an unfair perception of so-called “wealthier shoppers”. For instance many such consumers have had to tighten their belt in recent years due to a decline in real income. Some have been forced to try out Aldi and Lidl. Many have been pleasantly surprised by what they have seen there. Although brands might not be that familiar to them, the taste, quality and price, when combined have led to favourable impressions. It could be argued that this segment of shopper has experienced a change in perception of such retailers as a result.

Lidl has responded by setting up a “concept store” in the Republic of Ireland. This is a major shift in terms of store design and layout. No longer in this instance, is the shopper confronted with the Spartan conditions that are the preserve of the traditional discount store: basic shelving and merchandising, a cluttered feel to the place and a lack of staff to provide hep and guidance. In this format, the aisles are wider, more shop floor personnel populate the floor and surprise, surprise, and they are friendly and knowledgeable. They are there to help the shopper! It opened a similar “store of the future in the UK a month after its introduction in Ireland.

We are now witnessing more subtle shifts in approach across Aldi and Lidl stores. We are seeing wine cellars, baby- changing facilities, longer tills so that people have more time to unpack their items and self-checkouts.

In Italy, Lidl has produced an “Italiano” range in order to tap into the psyche of the Italian shopper.

In Germany, Lidl has introduced a new generation of stores which focus on value as opposed to the more narrow area of price. It highlights choice, quality, product ingredients and freshness and uses expert endorsed quality wines.

Aldi has placed a stronger emphasis on organic items and increased its range in this category substantially. It has also added a number of Fairtrade products to its range under the banner of “Fair”.

In the United Kingdom, a recent survey published by the consultancy firm Him, has shown that Aldi and Lidl are increasingly attracting more and more shoppers from the AB socioeconomic category, with figures showing an increase of around thirty per cent. Interestingly an increasing percentage of these shoppers are using discount retailers for their main shop as opposed to “top-up” shopping. This would appear to reinforce the view that they are making a greater appeal to this segment and significantly overcoming any snobbish and / or negative perceptions.

Both retailers are also beginning to increase the number and range of items in their stores. This appears to go against one of its basic principles; namely that it carries less than half of what one might expect to find in the traditional supermarket: 12,000 – 15,000 items as opposed to 35,000 – 40,000 items.

In summary we appear to be witnessing a “sea-change” in the respective strategies of Lidl and Aldi. The old shibboleths of low prices, low-to average quality merchandise, spartan store designs and so on, appear to be augmented by a move to a more “mid-market” to “up-market” positioning exercise. This, it could be argued is potentially taking them from a clearly articulated positioning strategy to a more mainstream “supermarket” position.

What are we to make of these developments?

Gainsayers will argue that this potentially will damage them in the longer term. They will lose their point of distinctiveness and become part of a wider and more homogeneous group of mainstream supermarkets. They will be replaced by existing hard discounters who will capture their position in this segment of the market. They will send “mixed signals” and messages to their loyal customers. By trying to appeal to a wider number of groups and segments, they will get lost in the “fog” of confusion.

Conversely it can be argued that they are following the natural law of “evolution and revolution”. This view suggests that all companies: retailers included, have to adapt and respond to changes in the environment. By remaining static and resistant to change signals complacency and torpor. Occasionally companies have to take major and radical decisions (revolution) and embark on a strategic direction that leads to a major shift away from traditional and established building blocks of success. Look at retailers such as BHS and Woolworths. They certainly failed to adapt sufficiently and they have now “left the building”.

I would suggest that we look at the “Wheel of Retailing” theory. This proffers the view that a retailer typically enters and makes progress in the market by going in with a low-price, low-margin strategy. As it becomes established in that market, it is faced with the challenge of widening its customer base. It also its product range and increases prices and margins. By becoming successful it naturally attracts competition. Over time it is usurped by one or two of these protagonists and loses its position in the market. In the “worst case scenario” it goes out of business or is taken over by another retailer.

Does this sound familiar?

Although this theory has been criticised by commentators: it is based on anecdotal rather than research-based evidence, it appears to stand the test of time.

We certainly can see some resonance in the manner with which Lidl and Aldi are adjusting, refining and implementing their current strategies.

As long as Lidl and Aldi avoid going too far in terms of more upmarket and higher priced product – in other words, retaining a balance, then they should continue to prosper in the short to medium-term.

We should remember at all times that the key principle of retail success revolves around retaining a coherent, consistent and relevant value proposition. If that is diluted too much, the retailer will lose its loyal customer base and more worryingly in the longer term, confuse the overall market-place. New entrants and formats will supersede existing concepts and we witness the wheel going round and round. At some point, old formats will reappear in various guises and provided they are relevant at that time to the shopper they will re-emerge once again.

Hence the value and contribution of the concept of the Wheel of Retailing!