We look at the German discounter’s most recent acquisitions and what it could mean for its future digital developments, including the idea of launching a marketplace.
Acquisition of German marketplace real.de
Schwarz Group, Lidl’s and Kaufland’s parent company, has acquired in June 2020 one of the largest marketplaces in Germany: real.de. The marketplace, which offers both grocery and non-grocery products, will be operated under the Kaufland name. This should complement the group’s existing online offer and enable it to offer a larger number of services to shoppers and manufacturers.
Strengthening online operations to create new opportunities
Rolf Schumann, Schwarz Group’s chief digital officer, said: "real.de is an essential component of our future offering. The combination of brick-and-mortar business and online trading will open up additional opportunities for us.”
This is the second acquisition of a digital specialist for the Schwarz Group, following its acquisition of Camao IDC in May 2020. With Camao IDC, Schwarz is looking to be able to offer new BtoC and BtoB services and solutions, like Amazon Web Services.
In the meantime, the group continues to develop its Lidl Digital operations, plans to build a new data centre and grow its online and digital teams. With the COVID-19 pandemic slowing down their growth, Lidl and Kaufland are expected to accelerate their ecommerce developments. Lidl has already implemented grocery deliveries in partnership with several online specialists in Ireland, Spain and Italy and is currently testing click and collect in Poland.
It seems the group is moving towards a more omnichannel strategy. By doing so the Schwarz Group could better balance its profitability between different channels and cover more needs through more services.
So, how likely could a Lidl marketplace be?
As ever this is something hard to predict, but the COVID-19 pandemic is changing the grocery retail industry and retailers, especially discounters, must adapt to remain relevant. With that in mind it is worth raising this question and try to explore the likeliness of such as service from the discounter.
First let us look at the signs showing this could happen:
- Lidl is the largest retailer in Europe by sales and is present in nearly all EU countries, meaning its network expansion will reach a limit at some point. It will need to find new revenue streams if it wants to maintain its pace of growth, and online services could be one
- Marketplace is a strategic pillar of the Amazon business. It has just launched one in the Netherlands and is planning to expand in Europe. However, it is currently closely watched by the EU, so there could be a gap for a European based retailer to take a lead
- A marketplace offers a huge choice, low prices, and convenient fulfilment, all are very attractive features for retailers and shoppers
- Other major retailers have already launched their own marketplaces, Carrefour being the latest
- The recent acquisitions offer new opportunities to launch new online services, an area where the retailer does not really operate
- Lidl Digital offices in Germany, Spain, Romania, and Bulgaria give it a competitive advantage, compared to only having offices in Germany
Now the challenges and hurdles that could stop it happening:
- This is new territory for the discounter and risks and levels of investment could be high. It will require new logistical network: huge warehouses and a large delivery force
- The competition is very strong, with retailers already offering very high level of services
- For a marketplace to work companies need to offer convenient fulfilment, Amazon can deliver it on the same day
- The efficiency and profitability of Lidl’s physical stores could slow down any interest in launching a new service. Instead it could focus on improving its existing assets
- In the post-COVID-19 world, priority will be given to existing operations, including supply chain and assortment
- A greater focus will also be put on low prices, as price wars are already starting in many markets
- Creating a marketplace website is easy, however fulfilling orders accurately and quickly is difficult
In conclusion the launch of a Lidl marketplace would not be a complete surprise. It would contribute to the Group’s diversification of revenues and contribute to a more sustainable future for the discounter. Still the discounter will need some huge investment to make sure it can offer a high-quality service to compete with others, on top of making it profitable.
This is something that should not be disregarded. We do not expect it to happen in the short term, as there are other priorities, but we do increasingly believe this is something that could happen in the future.
Looking for more insights?
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