Discount Retail Chain Lidl Germany (owned by the German Schwarz Group) opened its first discounter in Ludwigshafen. This makes the company not the first retailer with the low-cost concept, but it is the most successful. While competitor Aldi is in a permanent crisis, the Schwarz Group is opening up completely new business areas.
Just-in-time for Lidl's 50th birthday, the price war is back at discounters. Whether it's butter, cheese or pasta, the five-decade-long competition with Aldi has been given a new lease of life by recent undercutting battles. Experts do not see the big price turnaround in the face of high inflation. For consumers, however, the comparison of time-limited offers could be even more worthwhile in the future. And apart from the prices, the cards among the discount top dogs have now been reshuffled.
The history of the Schwarz Group, based in Neckarsulm, which today includes Lidl and Kaufland, dates back to 1930. At that time, Josef Schwarz founded the food wholesaler Lidl & Schwarz KG. His son Dieter Schwarz later joined his father's business and opened his first discounter in Ludwigshafen in 1973, 50 years ago today. This was the cornerstone of an empire with around 12,000 stores in over 30 countries today. With sales of over 100 billion euros, Lidl was the largest discounter in the world in 2021.
Lidl was actually one of the late bloomers: The first Aldi store opened its doors as early as 1962 and started the triumphal march of the discount concept with narrow, pallet-filled aisles, a limited selection of items and low prices. Norma followed two years later. Penny, like Lidl, then appeared on the scene in 1973.
"Lidl's recipe for success was that, like Aldi, they worked with a limited range from the very beginning. But they also made themselves distinguishable right from the start by also carrying branded goods," says retail expert Thomas Roeb from the Bonn-Rhein-Sieg University of Applied Sciences. Lidl had adhered to this concept stringently and aggressively, focusing on expansion and at the same time keeping its costs under control.
"At the end of the day, it's all about the price"
Martin Fassnacht from the WHU business school in Düsseldorf also says: "These are efficiency machines." The discount principle has moved with the times, in the meantime, the stores have been more beautifully designed, the selection of items has increased. "But at the end of the day, it's always about the lower price." Consumers in Germany, which has traditionally been price-sensitive, have recently had to swallow a lot in view of the increased energy and procurement costs. Prices rose sharply, especially for the otherwise inexpensive private labels of discounters, as Fassnacht observes.
The recent reductions in butter, cheese or pasta are a signal that things can go the other way again. "One can hope that the worst is now over. But we have to say goodbye to the idea that prices will return to their original level in the short and medium term," says Kai Hudetz, Managing Director of the Institute for Retail Research (IFH) in Cologne. Energy will remain expensive for the time being, and staff will also be more difficult to obtain and therefore no longer as cheap as it used to be. In addition, neither retailers nor manufacturers wanted to give up the price level. For the next few years, it is therefore more likely that Lidl, Aldi, Penny and Co. will increasingly advertise for consumers with time-limited special promotions and offer prices, so it could be worthwhile to compare offers.
In direct comparison to Aldi, experts currently see Lidl in a position of strength: "Aldi is in a permanent crisis," says Roeb. At Aldi Nord, for example, there has been no investment in stores and customer networks for too long. And Aldi Süd has lost its concept leadership. The result, he says, is slower growth. In addition, the dual structure is dragging its feet on the topic of digitization, says Fassnacht. "Lidl is more powerful, faster and more agile."
For example, Lidl has not only brought a digital customer card to the people and is diligently collecting data. According to the Cologne-based retail research institute EHI, Lidl is also one of the top ten German e-commerce retailers even though Lidl hardly offers any groceries online. Aldi does not even make it into the top 100.
Scandals and debates have little effect
The Schwarz Group is also currently positioning itself as a digital service provider and is already one of Germany's largest cloud providers. In addition, around the company's headquarters in Neckarsulm, financed by the foundation of the reclusive Dieter Schwarz, not only educational institutions or a programming school have recently sprung up. The money from the patron, who gave up the operational business back in 1999 and, according to the business magazine Forbes, is the richest person in Germany, will soon also flow into a large research center for artificial intelligence in nearby Heilbronn.
But debates and scandals also accompanied the history of Lidl. For spying on employees, for example, the discounter was fined a total of 1.5 million euros in 2008. And currently, the company is receiving fierce opposition from Deutsche Umwelthilfe for an advertising campaign with presenter Günther Jauch on what Lidl considers to be an ecological disposable bottle, the "circulating bottle". The company conceals unpleasant results and uses outdated data, according to the accusation. Lidl is aggressively countering this with press releases and a number of interviews.
However, it is not apparent that such debates have a negative impact on business, says Fassnacht. "The consumer forgets quickly." In addition, the discussion about the "circulating bottle" also underlines that Lidl has undergone a change of image: away from the secretive company, towards active communication and positioning in public. But despite all the new openness an iron rule remains: There will be no interviews or official photos with the now 83-year-old founder and owner Dieter Schwarz for the 50th anniversary.
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