Lidl Case Study: Trends and Strategies in the Retail Sector

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INQUIRY BASED LEARNING
LIDL

Table of Contents
TRENDS IN RETAIL........................................................................................................................................2
ANALYSIS OF LIDL........................................................................................................................................4
SWOT Analysis.........................................................................................................................................4
PESTEL Analysis........................................................................................................................................5
RECOMMENDATIONS..................................................................................................................................7
REFERENCES................................................................................................................................................9
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TRENDS IN RETAIL
2018 has been full of up and down for the retail sector across the globe. Many filed for
bankruptcy, many took a big load of cash with the end of season sales and other offers whereas
many had to deal with cases of data breaches. Besides everything, the retail sector is full of
opportunity and the ones who observe the opportunities first get the huge advantage of it.
Some of the new trends and opportunities are discussed below:
1. Brand & culture integration: Today consumer doesn't just want to buy a good, he wants
to buy an emotion. This led the consumers to stay loyal to a brand. CSR activities and
social integration are helping many brands to develop their customer base (FR, 2018).
2. Faster shipping of e-commerce: Over the years, the E-commerce industry saw a rapid
growth in terms of size and volume. But the new race in e-commerce is not about size
and volume; it's about the speed of delivery (Sandberg E., 2011). A study shows that on
an average it takes 4.5 days to deliver a good (FR, 2018). Services like amazon prime are
also delivering goods in two days. Consumers prefer fast delivery of goods once they
order them. The reason for the rise of many micro e-commerce companies is their
single day delivery offer to a closed location.
3. Subscription E-commerce: Consumers are showing interest in goods delivered at their
doorstep regularly. Subscriptions sector in e-commerce grew nearly 4 times its size in
2010, it stood at $ 2.6 billion in the year 2016 compared with $57 million in 2010. As per
a report by McKinsey & Company, nearly 15% of the e-commerce users subscribed
something in the year 2017.
4. Experimental stores: Consumers are not just expecting to get a good or service from a
store, they are looking for a place of social transaction. Concepts of stores have changed
from what it used to be, today all the major players are developing different types of
stores for different locations. Small format stores (best suited for urban areas) and
Cashier less checkout are some of the new trends under experimental stores concepts
(RD, 2019).
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5. Private Labels: Retailers are selling and even manufacturing goods under their brand
name. This helps retailers to get a bigger piece of a sell than what was offered to them
before.
6. Multi-Channel promotion: Companies are collecting data about individuals online
interests using multiple channels like Instagram, Facebook, E-commerce sites, etc. This
data is then used to present the goods which consumers are interested in. Selling is also
done using all these channels directly (FR, 2018).
7. Eco-friendly products and Methods: Consumers across the globe are showing
environment concerns. More and more consumers are buying eco-friendly and organic
goods. This new trend gave rise to a new sector of sustainable products which helps
consumers to contribute towards environment betterment.
8. Advanced manufacturing and Hi-tech Inventory management: A new trend of highly
advanced automated inventory management is seen this year. This trend demanded
Advanced manufacturing, which requires fewer efforts and more output without
needing much time and offered speedy delivery.
9. Pop up stores: Concept of Pop up store is getting famous day by day. Many famous
brands are using pop up stores to promote their products in a highly crowded area. such
a store stay for 1 to 30 days in a place and then move to a new place. This concept helps
brands in marking their presence where they don't have an existing store or physical
presence (SF, 2016).
10. Personalized Retailing: According to research, 70% of customers are ready to share
personalized information with retailers against the assurance of data safety to receive
personalized products offering. This data can be utilized to provide a hassle-free
shopping to the customer as per their needs and preferences (CB, 2019).
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ANALYSIS OF LIDL
Lidl is among the largest supermarket chains in Europe (SN, 2019). Lidl is present across 1000
stores in Europe, UK and US. It is the pioneer of supermarket chains in the world. It started it's
business 45 years ago from its first store in Germany with just 3 employees and now it is
available across more than 28 countries with around 3lakh employees (LD, 2019). They have a
big line of products including groceries, fruits, and vegetables, wines, meats, etc. SWOT and
PESTEL analysis can help to understand LIDL better:
SWOT Analysis
STRENGTH  Private labels: Lidl has a successful private label and is performing
well against competitors
 Pricing strategy: Lidl is known for providing goods at low prices
than its competitors.
 Supply chain and operation: Lidl uses highly effective supply
chain management system in its operation.
 General Merchandise: Lidl shares around 25 % of its store space
with general merchandise, with low pricing strategy it gives Lidl more
benefits in improving sales and profit (MG, 2019).
 Customer Satisfaction: Many factors like low pricing, easy and fast
checkouts, better services and availability of many products under one
roof ensure customer satisfaction.
 Lidl have a high pace of growth in all its ventures.
 Strong and strategic presence in key locations across Europe.
Weakness  Increasing operational costs demands, which are intensifying
situations in many places.
 It follows a predatory pricing strategy to face competition.
 Still not a global player when most of its customers are operating
in all the major markets.
 Part of many controversies like an incident of poisoning, spying
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on employees, etc. which affected its brand Image.
Opportunities  New technology can improve its operation and provide an
opportunity to develop a new pricing strategy.
 Lidl can focus on developing Asian markets.
 Lidl can use multi-channel strategy to reach more customers.
 Rise of private labels against brands is a good opportunity to
increase the sale of in-house goods.
 Lidl’s online presence has opened new channels to reach
customers. It should use tools like big data to provide customers with
personalized experiences (FF, 2019).
Threats  New Technologies developed by competitors can make the
competition intense.
 Change in customers buying behaviors.
 Intense competition and local players sometimes target others to
destroy competitors.
 Fluctuating forex rates attracts transaction risks.
 Practices which denigrates brand image.
PESTEL Analysis
It helps explain the impact of environmental factors on LIDL:
Political Factors
 High taxation can influence the price and profitability of many goods.
 A policy of governments on the competition can take the price advantage from Lidl.
 Strong Intellectual property laws help in stopping counterfeit products from selling in
the market.
 The Brexit issue will affect its operations in Britain.
 Trump's price war against foreign players in the US is intensifying the situation for Lidl.
Economic Factors
 Discount stores operate with very less margin against the high maintenance cost of
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stores.
 Its growth in a country is depended on the GDP of the country.
 An unstable currency poses a transactional risk when goods are not sourced
indigenously.
 Higher Unemployment levels in a country attract low wage workers.
Social Factors
 Demographics of the available customers decide the success of a product in the market
(SP, 2018).
 Interests and priorities of a society determine the type of products they need and this
will help in deciding the products range in a store.
 Lidl should stay aware of the social issues, and contribute to social causes by some CSR
activities to improve its brand.
Technological Factors
 New game-changing technology should be adopted before competitors to enjoy its
advantage beforehand.
 Advanced technology can help to increase profitability or to improve operation.
Environmental Factors
 Uneven weather can disrupt the delivery and operation.
 Climatic conditions require different storage facilities for certain goods.
 Lidl have to oblique the environment and wildlife rules to safeguard the environment.
Legal Factors
 Lidl have to pay attention to Health and safety laws, competition laws, employment
laws and environmental laws in its day to day operation.
 If Lidl doesn't take shelter under Intellectual property laws then it might lose any
competitive advantage from any breakthrough technology.
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RECOMMENDATIONS
Based on the trends in the retail sector and analysis of Lidl, a series of recommendations can be
given. These recommendations will help Lidl in multiple interrelated aspects like increasing
business, profit maximization, improving brand image, smoothening of operations and facing
competition etc.
1. First and foremost thing which Lidl need to focus right now is approaching Asian
markets. Countries like China and India are showing huge potential for retail
supermarkets. Many of its competitors like WalMart and Amazon are exploiting these
markets. The profits and competition in this market are very high and thus they would
prove to be a great place of Lidl to start the business.
2. The next thing Lidl should focus on is developing its social linkages to overcome the
stains of past controversies on its brand image. As discussed above, consumers are
shopping more with emotions and therefore it is very important for Lidl to create that
emotional experience for consumers (Sandberg, E., 2010). Joining a social cause, CSR
activities, donations or other such activities can be proved very helpful in strengthening
social ties and creating emotions.
3. Another big thing which Lidl must take care of before it too late is its e-commerce
platform. E-commerce sector is a very dynamic place to do business and every company
must adopt new practices and trends if it doesn’t want to stay behind. Lidl should
improve its online presence as it could offer a vast market without boundaries and
limitations. As discussed above, it should adopt the Multichannel model for integrated
selling across various social and e-commerce platforms. Lidl should also improve its
customer's online interface and experience along with improving its operations like
delivery etc.
4. As a mean to increase its profitability, Lidl should promote its private labels across all
the channels of selling.
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5. Lidl should try to adopt new technology like Cashier less checkout, Robotics inventory
management (Johnston A., 2014). This will improve its customers' experience and will
reduce the cost of operations along with creating automated standardized operations.
6. In a competitive market like retail, it is always necessary to stand apart. Many
companies use innovative approaches to stand apart from the crowd (Pantano E., 2014).
This presents an opportunity for Lidl to adopt eco-friendly practices as a mean to stand
apart. Lidl can adopt practices like Using sources of renewal energy, providing paperless
bills, offering eco-friendly products and abolishing the use of plastic bags. Apart from
this Lidl should also procure goods from suppliers who follow eco-friendly approaches in
manufacturing those goods. It is also an option to join a campaign for environment
protection and promote the campaign explicitly.
7. With the high pace of Urbanization, the value of real state skyrocketed and it is hard to
get a store in a key location with feasible costs. Many Companies are adopting urban
and pop up store models, which ensures their physical presence at a place where it is
hard to find and operate a big store. Lidl should adopt the concept of urban stores and
pop-up stores to increase its presence in congested places like Asia where the density of
population is too high. It should also develop big stores in places where the real state is
affordable.
8. In the 21st century, Data is a very powerful weapon. Lidl should collect important data
and use tools of Big Data analysis to take decisions and improve operation. Results from
Big data can be used for various purposes like designing and formulating business
strategies, creating a personalized experience for customers, predict customer behavior
based on past experiences, etc. It can help in minimizing the losses and exploiting an
opportunity along with provides better insights about the business itself.
Adopting the practices recommended above can help Lidl in improving its overall business
activities and will surely ripe fruits in the long run. Most of the recommendations are based
on recent trends and opportunities available today and acting fast on this recommendation
will give more benefits than waiting for the right time.
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REFERENCES
 CB, 2019. Retail Trends To Watch In 2019. (Online) Available at:
https://www.cbinsights.com/research/retail-trends-2019/ (Accessed on 28 April 2019).
 FF, 2019. Lidl SWOT Analysis / Matrix. (Online) Available at:
http://fernfortuniversity.com/term-papers/swot/1433/1119-lidl.php (Accessed on 28
April 2019).
 FR, 2018. (Online) Available at: https://www.forbes.com/sites/jiawertz/2018/11/28/5-
trends-that-will-redefine-retail-in-2019/#3fa69ad06526 (Accessed on 28 April 2019).
 Johnston, A., 2014. Trends in retail inventory performance: 1982–2012. Operations
Management Research, 7(3-4), pp.86-98.
 LD, 2019. Our History. (Online) Available at: https://www.lidl.co.uk/en/About-Us.htm
(Accessed on 28 April 2019).
 MG, 2019. SWOT analysis of Lidl. (Online) Available at:
https://www.marketing91.com/swot-analysis-of-lidl/ (Accessed on 28 April 2019).
 Pantano, E., 2014. Innovation drivers in retail industry. International Journal of
Information Management, 34(3), pp.344-350.
 RD, 2019. 10 retail trends to watch in 2019. (Online) Available at:
https://www.retaildive.com/news/10-retail-trends-to-watch-in-2019/545314/
(Accessed on 28 April 2019).
 Sandberg, E., 2010. The retail industry in Western Europe: Trends, facts and logistics
challenges. Linköping University Electronic Press.
 Sandberg, E., 2011. Business trends and logistics challenges in the Western European
retail industry. Journal of Business and Retail Management Research, 6(1).
 SF, 2016. What is a Pop-Up Shop?. (Online) Available at:
https://www.thestorefront.com/mag/what-exactly-is-a-pop-up-shop/ (Accessed on 28
April 2019).
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 SN, 2019. Analysis: U.S. grocery retailers “can effectively stand up to” hard discounters.
(Online) Available at: https://www.supermarketnews.com/retail-financial/aldi-lidl-
threat-can-be-met (Accessed on 28 April 2019).
 SP, 2018. Lidl Stiftung & Co. KG SWOT & PESTLE ANALYSIS. (Online) Available at:
https://www.swotandpestle.com/lidl/ (Accessed on 28 April 2019).
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