DUBLIN, Nov. 15, 2019 /PRNewswire/ — The “Lidl 2019: Going Omni-Channel, Disrupting Itself Before Others Do It, Vertical Integration, Digitalisation and US Expansion” company profile has been added to ResearchAndMarkets.com’s offering.
In 2019 Schwarz (Lidl and Kaufland) broke through the €100bn barrier in sales for the first time. The retailer grew by 7.4% to €104.3bn in 2018/19. Every two to three years the Schwarz Group has changed Lidl’s CEO – and since 2014 there have been 4 different bosses.
At the same time, Lidl added €20bn in sales. This also means that sales growth has not been a factor in the management changes – mostly these were due to internal disputes and Gehrig seems to have a disruptive style that asks for frequent changes. So far this seems to be working.And so, despite this remarkable success, Europe’s biggest retailer is changing its business model once again. The things that will remain the same are low price focus and an extreme focus on efficiency in all business processes.The things that will or have changed: (I) a focus on organics and environmental credentials, (II) increased vertical integration in all business processes around post-consumer (recycling and packaging) as a natural consequence of the success of producing its own private label products – and of course packaging is vital to the overall product proposition, (III) automation and digitalisation, (IV) the online push, arguably still in beta phase without full board commitment, and (V) US expansion, a massive opportunity for the company.Lidl was first, ahead of Aldi, to innovate and move on from the hard discount business model of the past. The retailer did so by sprucing up its tired store estates and creating a better ambience in the store combined with an SKU range extension. This clear trading up strategy, which included permanent listings of FMCG A brands for the first time broke the mould and forced Aldi into copying the strategy.According to the company, Lidl’s current SKU count stands at 3,500, of which 25% are FMCG A brands (875 SKUs), the remainder is a private label (75%). However, the permanent listing of FMCG A brands had two negative consequences, a clear rise in complexity and cost as well as becoming price comparable, which wasn’t an issue when Aldi and Lidl were predominantly private label only. The direct comparability of many products – especially the FMCG A brands listed by both retailers – has opened up a new opportunity.
Lidl is feeling emboldened to attack Aldi, the clear price leader in Germany – a position Aldi has held for decades. The discounter has launched a new ad campaign and a new hallmark called Lidl price. Lidl has gained considerable experience with the promotions on FMCG A brands in recent years and this has led to the discounter undercutting Aldi’s promotions as soon as they have been launched. This also shows that the lowest price is one of the best arguments for either Aldi or Lidl, despite all the trading up strategies.
The entire idea of a Big Data loyalty system would have been anathema to a discounter only a couple of years ago. In a further step, Lidl is launching its proprietary mobile payment system LidlPay in Europe, distinct from Apple Pay or Google. Many retailers worry about losing their shopper data and relationships to the disruptors and having to pay rent to the payment ecosystem companies.
That said most retailer initiatives have fallen flat so far, be it sector-wide cooperation or individual players going it alone. Tourists are also supposed to use the Lidl Plus loyalty solution when they are on holiday abroad, as the solution is conceptualised and rolled out on a Pan EU basis. This means the personalised communication supported by the SAP solution as well as the front end interface and brand is standardised (as is the main Lidl brand of course). Despite this omnichannel approach, online sales (4) are accounting for just 1% of Schwarz Group’s sales. Online at the moment seems to be kept at arm’s length.The last major change identified in this report remains (5) US expansion. Lidl believes it will take it a decade until the retailer has established itself in the USA. Sales growth is healthy, but the retailer has unsurprisingly not reached profitability yet.
Key Topics Covered:
Executive summaryThe concept
Concept: Relentless process optimisation towards digitalisation
Concept: Modernising one single format, internationalisation, buying power
A winning format: The Discounter – success factors
Lidl: The copy cat overtaking Aldi, the original
Lidl: The brand’s equilibrium, Kaufland the growth driver in CEE
Lidl: OSA, Warendruck, operational independence for Lidl and Kaufland – until now
Lidl: Category management, Kaufland the most successful EU hypermarket operator?
Lidl: Always the second mover more potential for Kaufland
Recent Key Developments