Lidl has said it is disappointed that planning chiefs turned down its proposal for Market Deeping last week, and is considering its future options for the town.
The budget supermarket says it stands by its proposal, despite the committee urging for a town centre location.
Lidl wanted to build a store in an out-of-town location on Peterbrough Road, but traders and councillors argued this would be a “body blow” for local businesses.
After hearing that rival retailer Aldi was close to submitting plans for a location near the shopping centre, the planning committee rejected the application last week.
A spokesperson for Lidl said: “We were disappointed with the decision as we feel our proposal is the most viable option currently to bring a much needed supermarket to Market Deeping and the surrounding areas.
“We would like to take the opportunity at this time to thank all of those who have supported us so far, as we now consider our future options for the town.”
People familiar with Aldi’s plans claim that an application will be submitted by July.
Councillors said in last week’s meeting that they didn’t have a preference which brand was given approval, but needed the plans to be in the right place.
South Kesteven District councillor Judy Steven said the proposed Lidl store would “take the heartbeat out of Market Deeping. I understand people want a second supermarket, but this isn’t the right place. It would be a real let-down for traders.”
Ward councillor Ashley Baxter added: “It isn’t about which brand it is, Lidl or Aldi, but it has to be in the right place. Aldi seems very confident that they can deliver the site in the town centre, rather than on Peterborough Road.”
Representatives from Lidl said at the time that they didn’t believe that a store would detract from high street shops and businesses, but still wanted to offer shoppers choice in difficult financial times.