Lidl Spain: The future of smart discount?
By
Sachon, Marc
Lidl (present in 31 countries with annual sales of +?120 billion) is one of the few retail groups with significant annual growth worldwide. The case describes the situation of Lidl Spain in 2023 and the key challenges the company was facing: how to compete with online retail, how to reduce its environmental impact, and how to ensure access to talent. Lidl Spain is special, amongst other things because it sources a significant share of Spain's horticultural products for Lidl's European store network (9000+). The case is based on data made accessible by Lidl Spain as well as academic research that was used to put the challenges into context. The case is not a "best practices" case, as the questions it presents are questions that Lidl's leadership is trying to solve.
Case written with the CFO and Board Member of Lidl Spain and Head of Corporate Affairs, Lidl Spain.
Case written with the CFO and Board Member of Lidl Spain and Head of Corporate Affairs, Lidl Spain.
Collection: IESE (España)
Ref: OIT-29-E
Format: PDF
Number of pages: 21
Publication Date: Jan 8, 2024
Language: English
Description
Lidl (present in 31 countries with annual sales of +?120 billion) is one of the few retail groups with significant annual growth worldwide. The case describes the situation of Lidl Spain in 2023 and the key challenges the company was facing: how to compete with online retail, how to reduce its environmental impact, and how to ensure access to talent. Lidl Spain is special, amongst other things because it sources a significant share of Spain's horticultural products for Lidl's European store network (9000+). The case is based on data made accessible by Lidl Spain as well as academic research that was used to put the challenges into context. The case is not a "best practices" case, as the questions it presents are questions that Lidl's leadership is trying to solve.
Case written with the CFO and Board Member of Lidl Spain and Head of Corporate Affairs, Lidl Spain.
Read more
Case written with the CFO and Board Member of Lidl Spain and Head of Corporate Affairs, Lidl Spain.
Year: 2023
Geographic Setting: Spain
Industry Setting: Retail
Learning Objective
The case can be used in MBA and executive programs. For the MBA it can be used to discuss supply chain management (ranging from purchasing to logistics and in-store operations, lean and six sigma) while for executive programs the focus is on how to address the challenges described in the case in a way that allows Lidl to continue its growth.
The case discussion will start with a basic analysis of the smart discount business model. Instructors can refer to the "focused factory" model here, i.e., the benefits of focusing on providing quality groceries at low cost to customers. This first part of the discussion should take not more than 30 minutes (for MBAs it could cover the whole session).
The second part of the case discussion should address the challenges described in the case. A good way to start is to ask participants if Lidl can compete with the online retail giants. This allows to enter into a discussion of last mile logistics and costs. The research data provided in the case enriches this discussion by showing that Lidl's business model is very solid, even in the age of online retail. In this discussion the economies of scale and focus of Lidls business model vs. the long tail business model of online players will give the instructor ample room for discussion. Once the last mile logistic topic arises, the instructor can enter into a discussion of costs. Current research shows that this is the weak point of e-food, home delivery and similar models, especially when paired with low cost groceries (consumers are more inclined to pay for delivery when they buy, say, consumer electronic products than milk and butter). At this point the instructor can open the last question for discussion by asking what is the best way to move large quantities of goods at lowest possible environmental impact. This will show that Lidl's full truck load approach to logistics is well positioned here - if the company ensures that it shifts to low emission vehicles as soon as it is feasible. Other topics that can be addressed here are dark stores, picking technologies, renewable energy sources (RES) etc.; this than lead to the question of attracting talent: retail is facing challenges here, as young people are increasingly attracted to other sectors.
The case discussion will start with a basic analysis of the smart discount business model. Instructors can refer to the "focused factory" model here, i.e., the benefits of focusing on providing quality groceries at low cost to customers. This first part of the discussion should take not more than 30 minutes (for MBAs it could cover the whole session).
The second part of the case discussion should address the challenges described in the case. A good way to start is to ask participants if Lidl can compete with the online retail giants. This allows to enter into a discussion of last mile logistics and costs. The research data provided in the case enriches this discussion by showing that Lidl's business model is very solid, even in the age of online retail. In this discussion the economies of scale and focus of Lidls business model vs. the long tail business model of online players will give the instructor ample room for discussion. Once the last mile logistic topic arises, the instructor can enter into a discussion of costs. Current research shows that this is the weak point of e-food, home delivery and similar models, especially when paired with low cost groceries (consumers are more inclined to pay for delivery when they buy, say, consumer electronic products than milk and butter). At this point the instructor can open the last question for discussion by asking what is the best way to move large quantities of goods at lowest possible environmental impact. This will show that Lidl's full truck load approach to logistics is well positioned here - if the company ensures that it shifts to low emission vehicles as soon as it is feasible. Other topics that can be addressed here are dark stores, picking technologies, renewable energy sources (RES) etc.; this than lead to the question of attracting talent: retail is facing challenges here, as young people are increasingly attracted to other sectors.
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