Why Lidl adapts certain prices according to the region - Companies

Why Lidl adapts certain prices according to the region – Companies

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This is unprecedented: under pressure from new Dutch competitors in Flanders, the low-cost brand is giving up national prices and now adapts those of a small number of references according to the region.

The various observers we were able to interview are unanimous: the decision taken by the discounter Lidl to adapt the prices of some of its products according to the regions is a small revolution. First of all because this strategy goes against the model of hard discount pure and hard. Either the one size fits all: a limited assortment, the same basic products in all stores, at the same prices. An operating model that allows low-cost retailers to be very efficient from one end of the chain to the other, to compress their costs and therefore offer less expensive items.

The various observers we were able to interview are unanimous: the decision taken by the discounter Lidl to adapt the prices of some of its products according to the regions is a small revolution. First of all because this strategy goes against the model of hard discount pure and hard. Either the one size fits all: a limited assortment, the same basic products in all stores, at the same prices. An operating model that allows low-cost retailers to be very efficient from one end of the chain to the other, to compress their costs and therefore offer less expensive items. This new direction taken by Lidl is also a revolution in the sense that the group itself has always publicly hammered home that its strength and identity reside precisely in the same constant low prices regardless of the point of sale visited. It is therefore fun to dive back into the brand’s advertising archives. A few years ago, the chain had full pages in the newspapers with this slogan: “The price of a product in your Lidl is higher than in another Lidl? We refund you the difference! At Lidl, prices are identically low in all stores.” With this campaign, the discounter positioned itself at the time against Colruyt, by somewhat mocking the local price differences practiced by the Hal distributor. The latter, with its promise of the best prices, has in fact always practiced regional prices, even local ones, which can vary from one store to another depending on the nearby competition. Since the arrival in the north of the country of the Dutch brand Albert Heijn (Ahold Delhaize group) and its very aggressive prices, Colruyt therefore adapted its prices locally as soon as its competitor set up a point of sale nearby. This did not fail to make consumers react at the time, hence the somewhat mocking campaign of Lidl. Only now, it is now the latter’s turn to announce regional prices. It must be said that the situation has evolved in the meantime. Understand: the competition has increased considerably. Albert Heijn now covers the entire north of the country, which has forced Colruyt to line up in all its Flemish stores. And the arrival in 2019 of another Dutch brand, Jumbo, only made the competition even stronger. In this context, Lidl has no choice but to adapt some of its prices. Why not all? “Lowering prices everywhere has become unaffordable,” explains Pierre-Alexandre Billiet, CEO of professional media Gondola, which revealed the information. It is that Lidl has operated in recent years a move upmarket bringing out the German brand of hard discount stricto sensu. The distributor has expanded its assortment, focused on fresh products, referenced some major brands, etc. “Its structure has become more complex and therefore more expensive, says our expert. At some point, prices increase. Lidl is therefore making a readjustment here to continue to keep its promise without having to lower its prices uniformly throughout the territory, what the brand cannot allow itself.” This new strategy should also allow the discounter to adapt much more quickly when prices rise among competitors. “Until then, the chain had to follow at national level and try to stick as closely as possible to Colruyt’s prices while hoping that the cuts made do not last too long. Thanks to its new strategy, Lidl will be able to readjust its prices very quickly. locally as soon as it is no longer necessary to descend.” On the side of the German brand, it is emphasized that it is in no way a question of varying prices from one store to another. “This only concerns certain well-targeted regions where competition is strong and in which we have noticed price differences”, explains Julien Wathieu, spokesperson, who refuses to say more. Only 10% of the assortment are concerned. Maximum. It is a question of certain fresh products (dairy products, some fruits and vegetables, etc.) and major brands. “In reaction to various promotions from our competitors, we have decided to reduce the price of certain references in certain places”, simply explains the manager. For the editor-in-chief of the professional media RetailDetail, Stefan Van Rompaey, it is clear that Flanders is the target, because of the tougher competition there. “Since the arrival of Albert Heijn and Jumbo in the north of the country, the prices there are a little lower, he underlines. find a way to stay competitive on the one hand, and make money on the other.” Doesn’t this new strategy run the risk of overbidding low prices in certain regions, with the impact that one can imagine on suppliers? For Pierre-Alexandre Billiet, it is clear, this announcement is not good news for our farmers. “Either the distributors are cutting back on their margins, or it is the farmers who lose. But sooner or later, the latter will be affected by this way of proceeding.” “We can clearly ask ourselves questions, engages Stefan Van Rompaey. The annual negotiations between manufacturers and large retailers are about to begin and all the manufacturers are already announcing that prices will increase due to the soaring cost of raw materials. , etc.”. Suffice to say that the fall discussions promise to be explosive…

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