How Lidl and Kaufland are strengthening their digital capabilities   

Date : 30 November 2020

Maxime Delacour

Senior Retail Analyst

Schwarz Group, Lidl and Kaufland parent’s company, is set to launch smart cloud solutions in early 2021. Lidl is reorganizing its IT and digital divisions to focus on the digital transformation of its stores, while the recent acquisition of the real.de marketplace will accelerate Kaufland’s omnichannel transformation.

Smart cloud solutions made in Europe

Schwarz Group will launch cloud computing solutions in January 2021 as it aims to compete with the likes of Microsoft and Amazon Web Services (AWS). The solutions are being developed by STACKIT, Schwarz Group’s digital brand for IT services. The acquisition of software specialist Camao IDC in May 2020 saw Schwarz bring on board more than 70 digital and technology specialists, who have contributed to the development.

Source: STACKIT

 

The smart cloud solutions from STACKIT will offer scalable enterprise solutions that help businesses in their digital transformation. These include database management, data storage and container management.

Source: STACKIT

 

To create differentiation with existing offers in Europe, especially AWS, Schwarz will rely on data centres located solely in the European Union and will guarantee its solutions are GDPR compliant.

Competition will be tough, due to competitors’ low prices. But Lidl and Kaufland’s successful models have been built around efficiency and value, so it is not impossible they will manage to replicate this and disrupt other cloud computing service providers.

More importantly, it will provide a wider range of data and solutions that could be used by the two retailers to become even more efficient and profitable. It will also help them future proof their business models by enabling them to digitize further elements of their operations.

Reorganisation at Lidl to support stores’ digitalisation

As reported by German trade magazine Lebensmittel Zeitung, it is understood Lidl is in the process of reorganising its digital and online divisions to create more synergies with its physical stores. This is especially in relation to the sharing of data. The Lidl Plus app is expected to be at the heart of its digital transformation, and as the app continues to evolve and add new features, such as Lidl’s own payment solution Lidl Pay and through the personalization of offers, it will improve the processes further.

In future, non-grocery ecommerce operations will be centrally managed by the Lidl Foundation, the division that oversees the retailer’s international operations. This could be the first step in a wider review, improvement, and development programme that led to the creation of a scalable and efficient non-grocery ecommerce solution that can be rolled out across Europe.

Source: IGD Research                   *As of 27 November 2020

 

This fits with Lidl’s strategic focus of driving improvements and the digital transformation of its strongest and most profitable asset: its physical stores. The aim of the new organisation is to successfully evolve the current model towards an omnichannel one.

In the longer term, Lidl will need to explore other ecommerce solutions more so it can adapt to shoppers’ evolving needs. This will be key in certain countries, such as the UK and France, where online is growing rapidly. Click and collect trials are underway in Denmark and Poland, while partnerships with last milers including Buymie in Ireland and Lola Market in Spain are expanding.

Supporting omnichannel initiatives at Kaufland

The handover of the real.de marketplace to Kaufland has been effective since 1 October 2020, following the sale of the online platform in June 2020. This was a strategic acquisition by the Schwarz Group, as it is one of the largest marketplaces in Germany by sales. While Kaufland’s strengths lie in its grocery products and physical stores, real.de will enable it to grow its presence in non-grocery ecommerce and evolve towards a more omnichannel operational model.

Source: real.de

 

Future implications

Together Lidl and Kaufland are expected to generate sales of more than €120 bn in 2020 in Europe alone. This figure will make Schwarz Group the region’s largest grocery retailer. Our CAGR forecasts to 2022 are +2.6% for Kaufland and +8.3% for Lidl, which are both ahead of Europe’s grocery market growth rate.

In addition, Lidl is present in 28 countries, with operations expected to launch in Estonia, Latvia, and Bosnia by 2023. As such, it is important to keep up to date with both retailers’ digital transformation as they will impact and have implications for most European grocery markets in the medium term. The size of the Schwarz Group, its fast growth and focus on efficiency and profitability could create a new strong competitor for digital service providers and more importantly a further disruptor in the online channel.

Looking for more insight?

Retail Analysis subscribers looking for more insight on Lidl can read our Lidl Strategic Outlook for 2020.