Discounter Lidl has added HBC and household items to its non-food online shop in Germany. Health & beauty, detergents as well as household cleaners will now be available alongside other grocery items such as wines, coffees and pet food, which have been added over the last two year. The products have been placed in a new section of the website “Lebensmittel & Drogerie” (food and drug) and this is further evidence that Lidl is ramping up their online offer to list other ambient food categories. This move begs the question; can Lidl really replicate their model and cost advantage online?
The offer includes most of the products sold instore, predominantly private labels as well as brands, offered at the same prices but with a delivery charge of EUR4.95. Whilst online grocery in Germany remains in its infancy, the biggest grocers, namely Rewe and Edeka, are readying themselves with a significant push into the online space as they see it as a means to differentiate themselves from the dominant discounters. A quick price comparison with Germany’s largest Grocers and Amazon bring up some interesting results.
In terms of price per unit on branded items, Lidl come out on top in two out of the three products. Amazon either match Lidl’s price or come out slightly more expensive. However, Amazon’s focus on bulk purchasing means shoppers have to buy these products in boxes of three or six. The biggest issue for Lidl is that including shipping costs it works out to be significantly more expensive than its competitors.
Discounters generate their cost advantages in-store, through pallet retailing and an efficient model throughout the supply chain. Discounters cannot replicate this advantage in grocery e-commerce but Lidl are confident that they can still succeed in this space. The key will be its weekly specials.
Discounter have and will continue to leverage weekly specials as footfall drivers in store with research suggesting 30% of shoppers will do their shop on the same day as non-food weekly specials begin. If Lidl are to succeed, it will have to replicate this phenomenon online.
How can this be achieved?
Firstly, Lidl’s online proposition will have to focus on its non-food specials. This will mean strengthening its offer in key categories such as electronics, apparel and home wares. Furthermore, the continued use of online exclusives will help drive shoppers to the store and attract new shoppers. However, this non-food offer has to be complemented by ambient grocery categories as opposed to being separate from it. This means initiatives such as recommendations and suggestions based on purchasing behavior has to be integrated into Lidl’s online architecture. To put it simply, if shoppers are buying baby clothes, introducing suggested articles such as diapers and wipes, is necessary if Lidl are to be successful. Success in online grocery is based on building total basket size to make it economically viable.
Secondly it is imperative Lidl highlight the price advantage it has over its competitors on individual items and overall basket. As shown in the quick price study, Lidl will look to be cheapest in many instances. However, with a larger than average shipping cost this message can be lost on the shopper. Securing a non-food sale is key to any success online as shoppers will accept the fee as necessary for the non-food purchase and see themselves as still getting value from Lidl on ambient grocery products.
Cost control is fundamental to Lidl’s model. Building new capabilities online go hand in hand with increased costs. However, if Lidl can successfully unite a non-food offer with the right suplimentary grocery offer, it will be ready to compete in an increasingly multichannel retail world.