There was something on the TV a few years ago as to why they (LIDL/ALDI) are cheep, and this is what I think they said. It was something to do with the stock choice. They have 1 maybe 2 options on most things. For example, spaghetti. In ALDI/LIDL they have 1 brand or spaghetti, where as in tesco they have 6/7/8 brands. If you thing about all of the space this takes up, if you do the same thing for every product, it takes up a lot of room. Room which you have to heat, light, furnish and staff.
Its all about giving you what you need rather than too many options. I personally find it easier to shop in places like ALDI and LIDL as you can get in and out in so much less time. You need pasta, you pick it up, where as in somewhere like tesco, you have to find it, then choose which one you want, a problem you don't have it there is just 1 option.