Detailed SWOT Analysis of Lidl – A German International Discount Retailer Chain

Products & Servies by Lidl

(Lidl Launches its Branded Cloth, Shoes & Accessories, Source: Daily Advent)

• Lidl Brand Clothes & Shoes
• Discount Store
• Food & Fruit Warehouse
• Grocery Store
• Snacks & Beverages Store

Competitors of Lidl

• Carrefour
• Tesco
• Walmart
• Woolworths
• Coles Group

Now that we understand the company’s key business, let’s look after the SWOT Analysis of Lidl.

SWOT Analysis of Lidl

SWOT Analysis of Lidl is a basic method that can help a company examine what it does best right now and develop a successful future strategy. It exposes the areas where people are holding back or how competitors may profit.

With the growing neck-and-neck rivalry in membership warehouses, it is critical for organizations like Lidl to examine the business environment.

To better understand the SWOT analysis of Lidl, refer to the infographic below:

Now first let’s begin with the strengths of the company from the SWOT analysis of Lidl.

Strengths of Lidl

Strengths are defined as what each business does best in its gamut of operations which can give it an upper hand over its competitors. The following are the strengths of Lidl:

• Low Prices: The primary reason for the success of discount stores like Lidl are the everyday low prices that they can offer in most daily use products. The store sells most essential goods at prices that are much lower than their competition and in addition to this also have regular promotions and offers in most specialist categories.
• Customer Satisfaction: Through low prices, faster checkout, lower waiting times and better service Lidl has been able to retain existing customers as well as attract new business. The strategy used by them is to focus on savings by comparing the prices on offer to mainstream retail prices.
• Private Labels: Lidl has been successful in introducing private label brands in most top-selling categories with the result that through competitive pricing strategies they have been able to force suppliers as well as competitors to cut down their prices drastically.
• Focus on General Merchandise: Lidl focuses more on general merchandise and more than 25 % of their shelf space is dedicated to general merchandise which usually gives discount stores higher margins than most other product categories. General merchandise also has a higher turnaround rate and generates a strong flow of cash while helping to offset the low price strategy on other low key items.
• Effective Operations Strategy: Like most discount stores, Lidl also has a strong focus on operational effectiveness. Right from their warehouse till the end of the supply chain through technology tools the retailer has tried to improve productivity while keeping a strict tab on costs. 

Weaknesses of Lidl

Weaknesses are used to refer to areas where the business or the brand needs improvement.   Some of the key weaknesses of Lidl are:

• Inability to Penetrate Successfully in Foreign Markets: Quite unlike global contemporaries like Target or Walmart, Lidl has restricted itself mostly just to Europe, the UK, and the USA. They have been lacking focus on Asia which has some of the most promising emerging markets like China and India.
• Pricing Problems: Lidl has always been known for its predatory and discriminatory pricing and there have been stories of how they have forced suppliers to cut down prices. Lidl has also been undercutting competition through unethical pricing strategies.
• Ethical Issues: Lidl has faced criticism from numerous sources for its unethical business practices. It has also been involved in several controversies such as the spying case on employees in 2008, extortion cases in Lithuania in 2016, numerous poisoning incidents across a gamut of products in various regions and several religious noncompliances.

Opportunities for Lidl

Opportunities refer to those avenues in the environment that surrounds the business on which it can capitalize to increase its returns. Some of the opportunities include:

• New Segments: Retail across the world is booming and with the growth of online retail the geographic boundaries hardly matter. This has opened up new segments as well as new markets to most retailers across the world.
• Increased Spending: With the increase in the number of dual-income households, the propensity to spend for most millennials across the world has grown and people are also seen to be indulging in impulse shopping, an opportunity for retailers.

Threats to Lidl

Threats are those factors in the environment that can be detrimental to the growth of the business. Some of the threats include:

• Competition: The main competitors of Lidl are Aldi, Morrisons, Asda, Sainsbury’s and Tesco. In addition to this, they also face competition from online stores like Amazon.
• Increased Focus on Low-income Groups: The focus on an economic segment is likely to create the image of low-quality players and in the long run it may impact the growth of a business like Lidl which will need to continue to be present in just the low-income low-value segment.
• Image is of Low Quality: Because most of the products sold in Lidl have a low price and are majorly from private label brands, the products are assumed to have low quality as compared to competitors products.

This ends our detailed SWOT analysis of Lidl. Let us conclude our learning below.