Lidl: the amazing rise of the German discounter taking over the world
Lauren Weymouth
25 May 2017
A Lidl story, a big success
The second largest German grocery chain, Lidl, is set to open 100 stores in the US by the end of 2017 and promising to undercut retail giant Walmart by up to 50%. But where did the supermarket come from and what’s the story behind its success? We reveal all…
Where it all began
The Lidl story began in 1930 when a man called Josef Schwarz became a partner in Südfrüchte Großhandel Lidl & Co – a neighbourhood fruit wholesaler, which he soon developed into a general food wholesaler.
World War II
Unfortunately, as a result of World War II, in 1944 the company fell apart and a decade-long reconstruction period began.
Rebuilding
Josef’s son, Dieter Schwartz (pictured), who founded Schwartz Group, a retailer specialising in discounted supermarkets and wholesale markets, started work on rebuilding Lidl again.
Introducing Lidl
Led by Dieter, Schwartz Group finally formed Lidl Stiftung & Co. KG, a discount retailer based in Neckarsulm, Germany. Dieter decided not to call the firm Schwartz-Markt, because it translates as ‘black market’. Instead, according to the Guardian newspaper, he eventually bought the naming rights from the store's co-owner Ludwig Lidl, by now a retired schoolteacher, for 1000 marks (roughly £442 in today’s money).
First store opening
After successfully founding the firm as Lidl Stiftung and Co. KG, the first store was finally opened in 1973 in Ludwigshafen, Germany (pictured). Just three people were employed to run the store, which sold 500 product lines.
A household name
By the 1980s, the supermarket was a household name in Germany, operating what it claims was a “simple vision that inspires us all: high quality at low prices”.
No-frills
The no-frills approach to shopping, Lidl’s business model was based on that of its competitor Aldi. All products were, and still are, sold in their original packaging. Customers simply take products from the packaging and staff refill them when they’re empty, rather than constantly re-stocking shelves.
Cutting back
Because of such a simple model requiring minimal labour, staffing is kept to a minimum to save on cost, which subsequently allows for cheaper products in-store.
Smaller range
Compared to other supermarket chains, Lidl started with a much smaller range of products and fewer branded lines. Even now, the store now has 1,500 to 1,600 lines but just 330 branded lines, compared with the 15,000 usually found in larger supermarkets.
Breaking Europe
The German supermarket giant soon expanded to the rest of Europe. By the mid-90s, stores were popping up all over the continent.
Going global
In 2015, Lidl announced its plans to expand to America, Russia and Australia, with the aim of having 20 supermarkets in the Russian Federation by 2020.
Making the top five
In the same year, Lidl moved into the top five of the world’s largest retailers. The company has over 10,000 stores across Europe and over 230,000 employees.
A new approach
Unlike the rest of Europe, the UK started focusing on slightly different areas to the head office. Lidl UK decided to invest more in marketing and public relations, as well as providing employees with benefits that weren’t required by law.
Pressure on profits
The new approach was led by former Lidl UK managing director Ronny Gottschlich (pictured). However, the increased spend on marketing hit company profits, which subsequently caused friction between Lidl UK and the head office in Germany.
A quick exit
Following this, in September 2016, Gottschlich unexpectedly left the firm. He was replaced by Austrian sales director Christian Härtnagel (pictured).
Big bucks
But the downturn in the UK didn’t ever affect the company’s worth. As of 2016, Lidl has been raking in global sales of around $85.7 billion (£66 billion).
Happy shoppers
Many people started switching to discount stores like Lidl during the economic downturn in Europe in the late 2000s, which saw its popularity soar as people sought cheaper produce. But once the economy improved, the happy shoppers didn’t ever turn back.
Non-branded products
Part of Lidl’s appeal is its huge range of non-branded products, which have been found to taste as good as — or better than — the branded, more expensive products in bigger supermarkets.
Reaching out
Now, one in three Lidl shoppers in the UK is from a wealthy background, according to research by him! published in The Grocer magazine.
Premium ranges
The proportion of wealthier shoppers rose dramatically after the store started introducing more premium products to its range such as: award-winning wines; fresh foods such as lobster, steak and smoked salmon; and other delicacies considered to be favorites among wealthier shoppers.
Bargain prices
But the luxury goods still come with a discounted price. Lidl UK has been known to sell a whole Serrano ham joint for just £39.99, £3 caviar and £9.99 champagne.
Criticism
However, it’s not always been plain sailing for the German discount giant. Trade unions in Germany have repeatedly criticised the firm for breaching workers’ rights.
Workers’ rights
According to the UK’s Guardian newspaper, staff were being 'snooped on' by Lidl in the mid-2000s. The paper reported that an investigation by German news magazine Stern found there was an "extensive espionage system" in Lidl shops around Germany that were installed to record "how many times they went to the toilet, details about their love loves and personal finances". However, the chain claimed the official reason for the cameras was simply to "reduce shoplifting", the Guardian reported.
Changing the supermarket game
Despite this, Lidl, alongside fellow German competitor Aldi, is now one of the leaders in the supermarket world, threatening some of the world’s biggest chains, such as UK stores Tesco and Sainsbury’s, and is now taking on the Waltons’ retail giant, Walmart. The Schwarz Group is now Europe's biggest grocery retailer, according to Deloitte.
Putting up a fight
But unlike the rest of Europe, French retailers have been successfully fighting back against Lidl, and it is the only country where discounters such as Lidl have seen a significant drop in market share.
Price cuts across the broad
In 2008, French retailers managed to fight back after a law change, which allowed them to freely negotiate prices with suppliers, meaning they could introduce big, competitive price cuts.
Schwartz success
But this hasn’t affected the Schwartz family. Schwartz Group now has an annual revenue exceeding $90 billion (£69 billion), according to Forbes. The Group is comprised of Lidl and Kaufland, a German hypermarket chain which combines a supermarket and a department store
Billionaire list
Dieter Schwartz regularly appeared on Forbes’ billionaire list, but was removed after claiming he had transferred his ownership of Lidl to a charitable foundation – the Dieter Schwartz Foundation (team pictured), which supports education and daycare facilities.
A charitable purpose
But in 2013, he reappeared in the list after it was revealed the foundation is a limited liability company with a charity purpose, rather than a foundation.
Next stop: USA
In June 2017, ahead of schedule, Lidl will open its first 20 stores on the east coast and a further 80 will be opened by the end of the year. It has already taken on 1,400 staff in the US and is promising to undercut Walmart by up to 50%. Watch this space…
Comments
Be the first to comment
Do you want to comment on this article? You need to be signed in for this feature