Lidl is a discount grocer with an impressive share of the retail market. The company has over 11,000 outlets throughout Europe and the United States.
If you’re curious about how the company achieves that market share, then read on to find out what I discovered after performing a Lidl SWOT analysis!
What is the Lidl SWOT Analysis In 2023?
Lidl’s SWOT analysis delves into the grocer’s strengths, such as its affordable pricing model and competitive advantage for 2023. Also, it examines how structural weaknesses like slim profit margins undermine growth efforts. However, the analysis also reveals opportunities and threats in the market that Lidl should be aware of.
Read on to gain greater insight into Lidl’s SWOT analysis, especially about the company’s strengths, weaknesses, opportunities, and threats!
What Strengths Does Lidl Have?
Lidl’s strengths result from policies and strategies employed over the years according to its unique value proposition and mission statement.
These strengths have made it possible for the company to capture market share and achieve growth.
Some of Lidl’s strengths are as follows:
- Low pricing model
- Private label products
- Customer satisfaction
- Strong brand name
- Effective operations strategy
- Reliable supply chains
- Effective Marketing Strategy
1. Low Pricing Model
Lidl uses a pricing model that saves on its products’ production and distribution process and passes on the savings to the customer.
When it entered the US market, Lidl’s offerings were 9% and, in some instances, up to 50% cheaper than conventional grocers.
The discount store upholds this in all its markets, sometimes going head to head with fellow discount store Aldi.
Besides its low prices, Lidl also offers regular discounts on most products.
This pricing model has been key to the store carving out for itself a niche in all the markets it ventures into and spurring growth.
2. Private Label Products/ Store Owned Brands
Private label products have been instrumental to Lidl’s promise of offering the most affordable quality products on the market.
Almost 90% of products on Lidl shelves are private label brands. The store-owned brands are cheaper because the distribution process cuts out the middleman and saves on costs and time.
Lidl also has greater control over the production process and costs, resulting in lower initial costs.
Again, the result is cheaper than other brands.
These products are always almost the same quality as other brands, and their availability at lower pricing attracts cost-conscious buyers.
As well, these products carry a higher profit margin than other brands, and revenue from store-owned products is essential for the survival and growth of Lidl.
3. Customer Satisfaction
In its dealings with the customer, Lidl undertakes to provide quality at market-leading prices.
To deliver on quality products, Lidl cuts away at everything except quality. It also maintains close control over the production process of its store-owned brands.
This way, its products are of as good quality as other well-known brands. Further, the store offers an astonishing array of products to satisfy most customer needs.
All these efforts have borne fruits, as Lidl scored higher on customer satisfaction surveys than all other retailers in the UK.
Lidl’s delivery on its promise is also earning it custom from a lucrative demographic- the younger, more affluent buyer.
4. Strong Brand Name
Lidl has successfully branded itself as the business that provides quality at the lowest possible price.
This brand has permeated all the markets it ventures into and makes for excellent opening day sales.
A strong brand name with positive quality associations for value enhances customer experience and is great for attracting investors.
5. Effective Operations Strategy
Lidl’s operational strategy aims at simplicity and efficiency to offer quality products at low prices.
The retailer keeps staffing to a minimum and implements quick checkout mechanisms, meaning more transactions can be completed.
Lidl’s outlets are modest, with products displayed in their shipment boxes.
The layout is also simple to facilitate a quick walkthrough.
Lidl has improved its relationship with its employees to attract and keep talent vital to effective competition.
The retailer now offers its employees benefits and compensation not necessarily mandated by law.
6. Reliable Supply Chain
Lidl puts supply chain economics at the heart of its strategy to maintain low prices.
The company works closely with its suppliers and carriers to harmonize delivery and plan for contingencies to save money.
The company also tries to anticipate demand based on shopping trends and seasonal promotions to save on shipping.
7. Effective Marketing Strategy
Lidl uses its low prices to attract and retain its customers, but that’s not all. Lidl segments its potential clients according to various factors like income, values, and preferences.
Also, it uses its low prices to attract customers regardless of the segmentation.
Most of these are out shopping on a budget to save money. Such shoppers hold no brand loyalty above value and are attracted by discounts and offers.
For such customers, Lidl offers its sound quality but cheap store-owned brands and frequent discounts and products on offer.
This marketing strategy has been instrumental in capturing the market wherever Lidl goes, especially in times of financial constraint.
What are Lidl’s Weaknesses?
Lidl’s weaknesses are internal structural inadequacies resulting from the pursued business model strategies and policies.
The weaknesses hamper its growth into new markets and hinder the ability to exploit new opportunities.
Listed below are Lidl’s current weaknesses:
- Inability to penetrate new markets easily
- Failure to effectively leverage e-commerce
- Ethical issues
- Negative publicity
- Near exclusive focus on budget shoppers
1. Inability to Penetrate New Markets Easily
Lidl has successfully penetrated the European markets but has had only moderate success in the US market and none in the emerging markets.
The retailer has only 140 stores in the US, a mere tenth of those enjoyed by its rival heavy discounter Aldi, despite favorable reviews from customers.
To catch up, Lidl is forced to make a heavy investment while at the same time trying to hold onto its existing share of the market in a competitive environment.
This failure is due partly to competitors’ strategic entry deterrence measures, poor selection of sites, and Lidl trying to deviate from its business model.
Lidl tried to do everything on a bigger scale- it opened larger than usual stores and stocked more products than it usually does.
It thus had to run costly stores in a market where it had little experience, and simply couldn’t keep up using the low prices it offered.
Because it has few stores, Lidl cannot leverage the economies of scale vital to profitably offering a low price.
2. Failure to Effectively Leverage e-Commerce
The future of business is e-commerce; online shopping is on an unrelenting march, and Lidl has no option but to keep up.
Over 50% of all buyers begin shopping with an online search, and most go on to complete their purchases there.
All the retail market leaders have an extensive online presence, and most owe their success to that.
Lidl, however, has ventured tentatively into the online space, despite losing market share in the UK to competitors whose e-commerce capacity gave them an edge.
The fear at Lidl is that the benefits of e-commerce don’t match the costs, which is unfortunate for the retailer in the long run.
3. Ethical Issues
Lidl has faced several scandals, ranging from merely unethical to illegal.
The charges range from food products contaminated by pathogens and even prohibited drug traces.
Additionally, Lidl has been accused of misleading branding on some milk and meat products.
The company came under criticism for violating its workers’ rights by spying on them and suffered union action in some areas of operation.
These scandals have cost the retailer business and recalled products. Lidl has also had to spend on publicity and compensation to victims, which no doubt digs into the company’s profits.
4. Negative Publicity
Because of the scandals hinted at, Lidl has suffered much negative publicity that undermines its ambition to prosper.
Negative publicity forms a negative association in the customers’ minds and may lead to brand avoidance, especially as ammunition in competitors’ hands.
To combat negative publicity, Lidl has to divert resources meant for growth.
5. Near Exclusive Focus on Budget Shoppers
Budget shoppers are a lucrative market, but Lidl’s exclusive reliance on its customers has made the company weak in certain areas.
Because budget shoppers can only be sold on cost and not any other value proposition, Lidl does not find it worthwhile to invest in e-commerce.
After all, having cut away everything to offer the lowest price, you have to bring the price back up to provide the convenience of online shopping and delivery.
What are Lidl’s Opportunities?
Changes in the economic and business environment have uncovered several opportunities. Here are Lidl’s opportunities:
- Emerging markets
- Increased consumer cost-consciousness
1. Emerging Markets
The retail market in Europe and the US is highly competitive, even for hard discounters like Lidl. Retailers like Lidl have been riding the wave of the increase in cost-conscious consumers.
However, there is yet unexplored potential in the emerging markets in South America, Asia, and Africa.
This potential will soon outstrip that in the competition-filled western markets.
Investing heavily for market share provides a superb opportunity for a company as long as the venture is cautious and well advised.
2. Increased Consumer Cost Consciousness
Financial pressures on the consumer have led to a change in shopping habits.
While there has been an improvement in the world’s major economies, consumers still tend to shop on a budget.
This accounts for the rapid growth of discount stores and some major retailers like Amazon, tweaking their subscriptions to attract budget shoppers.
Lidl can ride this wave to increase its market share, especially in the US and subsequently into Canada and even Mexico.
What are the Threats Lidl Faces?
Threats are external factors in the business sphere Lidl operates in that may undermine its ability to grow.
Listed below are the threats facing Lidl:
- Growth of online shopping
The markets in which Lidl operates are rife with cutthroat competition. Lidl faces competition on each of its value propositions.
The company faces competition on its cost proposition from retailers like Walmart and Aldi, and other supermarkets and local grocers. That competition has already cost Lidl its efforts to expand into the US.
Upon its entry into the market, Lidl’s competitors launched a strategic entry deterrence by lowering their prices.
The move was successful and delayed Lidl’s expansion.
2. Growth of Online Shopping
The growth of online shopping is usually an opportunity, but only to retailers that have set themselves up to benefit from it.
As discussed earlier, Lidl has not gone all out on this and focuses mainly on its physical stores.
The retailer has even lost some market share to retailers who embraced online platforms, but it still holds back.
Given the pace with which the e-commerce trend is taking root, failing to hop onto the online platform is almost suicidal eventually.
To learn more, you can also see our posts on what is Lidl, Lidl’s business model, and the Lidl stock.
Lidl’s SWOT analysis forms an excellent reference for the company as it charts its way forward for survival and growth.
The analysis has highlighted strengths to build on, weaknesses to address, as well as opportunities to excel amidst existing threats.