The Grocer

Lidl is winning due to differentiation, not just cost

Lidl Is Winning 
Due To Differentiation
Not Just Cost

Kantar’s data to March 2024 shows that Lidl continue to grow well ahead of the market with sales up 9% versus last year.  Lidl’s market share, at 7.8%, is not that far behind Morrisons.

Is this just about Lidl building more new stores than the competition?  That is part of the reason – but this begs another question.  How can Lidl afford that?  It’s because their stores are so popular with shoppers.  That’s down to their proposition – what they offer to customers.

The book Blue Ocean Strategy talks about “value innovation” – pursuing differentiation and low cost simultaneously.  It is relatively easy to differentiate your offer by increasing the cost, or to reduce costs by sacrificing differentiation.  It’s much harder to deliver differentiation and lower cost at the same time.  But if you can do it, customers will be delighted.

Greggs is an example.  Why buy a croissant or a Belgian bun from Costa if you can get a fresher one from Greggs next door, at about half the price?  Flying Tiger and Franco Manca may be other examples.  In grocery in the UK, Lidl do this as well as anyone.  The market share data tells us that.

I won’t talk in detail about the cost axis.  We know that Lidl do that well.  Maybe Lidl Plus has made them even stronger there.

It is the differentiation axis that is often missed by competitors even though it’s there in plain sight.  Here are three examples.

The Lidl bakery is at the front of the store.  It offers a fresh, abundant display of sweet and savoury bakery.  Displays are clean and well lit.  It is obvious if you visit, that it brings lots of Eat Now traffic (often at times which would otherwise be quieter).  No other supermarkets compete effectively with the value offered.

Lidl’s Produce is similar in some ways.  Fresh, abundant, well looked after.  Featuring some products and ideas rarely seen elsewhere.  Attractive trays of loose Cherries or Nuts, with a scoop and bags.  Speciality Lemons with the leaf on – a nice little difference to catch the eye.  Huge colourful Loose Tomatoes.  Increasing presence in Organic.

Then there is Flavour of The Week, highlighted across several categories. When I last visited this was Alpine food.  This week it is Iberian.  For most UK shoppers, this is a bit different.  You may say equivalents are available in other supermarkets.  Even if they are, very few shoppers will have noticed them.  How have the competition let it be that Lidl are leading on different foods from other regions in this way?

So Lidl is not just about price.  It is offering something different as well.   If it keeps up with this value innovation, and there is not a more multifaceted response from competitors, it will keep winning in the UK.

​Jeremy Garlick is a Partner of Insight Traction, consulting with FMCG and Retail companies. He was formerly Head of Insight at Sainsbury’s, Waitrose and Premier Foods.

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