Lidl continues to grow well ahead of the market, with sales up 9% versus last year, according to Kantar data to March 2024. At 7.8%, the discounter’s market share is not 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 it? It’s because its stores are so popular with shoppers. And that’s down to what it offers 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 are other examples. In UK grocery, Lidl does this as well as anyone. The market share data tells us that.
I won’t talk in detail about the cost axis. We know Lidl does that well. Maybe Lidl Plus has made it even stronger there.
The differentiation axis is what 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 obviously brings lots of ‘eat now’ traffic, often at times that would otherwise be quieter. No other supermarket competes effectively with the value offered.
Lidl’s produce is similar in some ways. Fresh, abundant and well looked after, featuring some products and ideas rarely seen elsewhere. We have attractive trays of loose cherries or nuts, with a scoop and bags. Then there are speciality lemons with the leaf on – a nice little difference to catch the eye. And huge colourful loose tomatoes, with an increasing presence in organic.
Finally there’s ‘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 – but even if they are, very few shoppers will have noticed them. How have the competition let it be, that Lidl is leading on different foods from other regions in this way?
So Lidl is not just about price. It’s offering something different as well. If it keeps up with this value innovation, in absence of a more multifaceted response from competitors, it will keep winning in the UK.
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