Lidl’s Unique Business Model and Position in the Market
Outlining the essential components for ‘effective business operations management’ (creating value for the customer) for LIDL’s operation within the UK
In a very short span of time, Lidl has been able to create an image that UK customers have adored. The Lidl’s management has realised the urgency to have more stores as to reduce the barrier that limits UK customers to reach to the Lidl’s stores. It is the management’s perception that Lidl has a comparatively limited number of stores than the four giant UK grocery stores like Tesco. Customers have limited option and hence, as per the Lidl’s management, a long area is still to cover (Scarborough et al. 2015). Lidl unlike Tesco and other giant UK supermarkets had been different in terms of number of items in stores. Tesco and Morrisons have both private label and their own branded products in stores (Adewuyi 2016). On the other hand, Lidl has considered only its own branded products. This way Lidl has been able to limit the number of items. The number of item in each of the stores is 700 (Wood and McCarthy 2014). The business model of Lidl has allowed the company to offer quality products at the very competitive prices. The other grocery store giants like Tesco and Morrisons have been following the ‘Every Day Low Price’ (EDLP) strategy. The EDLP strategy means offering discounted price every day (Haleem and Jehangir 2017). However, both have struggled to manage the supply and demands. This is because they had required quality products on a daily basis to offer customers the discounted price (Hugos 2018). On the other hand, Lidl with its strategic alignment between its business and supply chain strategies has been able to manage the supply and demands (Hugos 2018). Lidl had relied on offering a limited range of its own branded products. Additionally, segmentation was done to have specific considerations on a particular segment of product. This way Lidl was able to work closely with suppliers. Hence, they had ensured the supply of quality products and in a comparatively low cost (Kwon, Hong and Kim 2017).
The Soft Systems Methodology can be used to either resolve a problem or bring a change into the business operations. It is divided into seven stage which helps to represent the problem and reach to the most feasible action necessary for bringing the required changes (Ghosh, Roy and Sanyal 2016). The first stage speaks of a situation where it is considered that a problem does exist. In regards to Lidl, the problem is the existing model which is good but not as competitive as the online shopping. There cannot be the similarities as well; however, Lidl must have a business model which keeps the company firm strong in market and contributes to increase its customer retention rates (Kogan et al. 2017).
Lidl’s Supply and Demand Strategy
The second stage is expressing the problem situation. The identified issue is a real problem as customers have now other options to purchase. The disruption brought about by the online shopping platforms has had hammered the daily visit or footfall to physical stores and had affected its sales & customer retention rates as well (Nylén and Holmström 2015).
The third stage is related to the definition of relevant systems. Relevant systems with respect to Lidl UK are the business model and the new layout of the stores. Lidl follows an unlike business model than Tesco and Morrisons. Lidl offers discounted or attractive prices but on few occasions or on a selected day of the month. They plan it by months in advance. Additionally, they offer products that are not owned by Lidl; however, are worth a value for purchase. In this way, Lidl is able to manage a balance between supply and demands (Bhardwaj et al. 2016). A new layout is expected with the Hybrid model that Lidl is supposed to implement in operations. A hybrid model such as Adjacency Model encourages the use of additional stuff like the use of a store integrated app through which customers can make their selection of products they need to purchase. The selected items will then be delivered to customers at their convenience places. Innovation is required for helping customers reinvent the desire for physical stores (Bhardwaj et al. 2016).
The fourth stage is about a change in the existing business practice with the help of the suggested Adjacency model in the third stage. The change will be brought about with the help of the suggested business model in a way that it is integrated with a large number of smart strategies like educating the every corner of store with just a go on the suggested inbuilt iPads in stores.
The fifth stage is regarding the comparison in the real world situations. Customers are now moving to online purchase in specific the Millennials (Rezaei and Ismail 2014). With just a few steps on internet, available products can be purchased with relatively easier experience than physical stores. Customers do not have to carry this as well as products are delivered to their homes (Rezaei and Ismail 2014). The suggested hybrid model must bring the changes that are both possible and feasible to Lidl. The change must give a sense that these all are innovative and also fulfilling the influenced demands of consumers (Nilsson et al. 2015).
The sixth stage is identifying the possible and feasible changes. In the context of Lidl, the possible changes can be the adherence to various models for implementing the hybrid facilities. They can follow an unconventional model within which customer would walk away after picking their desired product. The product will be delivered to them two days later in mails. This looks bit unusual that customers won’t get the products instantly; however, this will be optional and just provide customers the opportunity to get rid of the burden of carrying the purchased goods wherever they go. Retailers will then be able to avoid backorders, inventory and terrifying task of managing loads of attire presentable on a daily basis (Alftan et al. 2015).
Using Soft Systems Methodology to Identify and Solve Problems
“Brick and Click Model” can also be considered. It is about integrating one or few stores with the dedicated website for the online purchase. This would allow customers making the online purchase as well. Customers can pick their purchased goods by physically visiting to the particular store or by requesting a home delivery. Customers will have the opportunities for whether be in store and observe the desired items from their different perspectives or they can also book it directly through the online platform. This model will help employers in overcoming the burden of investing on returned goods. This is because the returned or rejected products are shipped back again causing the extra investments (Mena and Bourlakis 2016).
The seventh stage is about finding the gaps between the selected models in the hybrid facilities and taking the appropriate actions to improve the problem circumstances. Two models have been considered as examples in the hybrid facilities. The first model “Adjacency model” is good in regards that it gives space to employers to go beyond their existing strategies and bring the differences as much it is possible. It is up to the employer and its strategic capabilities to go for a maximum than the current offerings (Fernie and Sparks 2014).
The second model “Brick and Click Model” encourages a layout which gives customers the option to shop from both offline and online. Customer will have both the options such as either go to stores or shop by online from the dedicated stores. Products can be purchased from the store or can also be ordered for a home delivery. However, number of stores with integrated online facility will be in limited numbers (Duffett 2015).
Two models have been discussed and been advised to Lidl such as “Adjacency Model” and “Brick and Click Model”. However, only one model can be the best recommended model for the company. That one model can be identified by discussing the gaps in both of the suggested models. “Brick and Click Model” can be facilitated in limited number of stores which entirely depends on the management. Hence, this will be beneficial for area specific customers only who have Lidl in their area with integrated online shopping services. Customers with no such Lidl in their area understandably will have no difference in their shopping experience.
“Adjacency model” mean to go beyond the existing business. Hence, this will accommodate the feasible changes to the existing business. Such changes must be the innovative ones like arrangement of goods in shelves, strategies to reduce the wait time near the cash counters and possibilities for home delivery as well in case customers do not want to carry the goods wherever they go. In this model, there won’t be the online shopping option; however, this can still be appealing as the integrated online services to every store is more complex a process than introducing a few of strategies to make it appear as if the online platforms.
Proposed Solutions: The Adjacency Model
The recommended model “Adjacency model” for Lidl will offer a lot of features to customers like the number of stores, option to avail for a home delivery and lot more. Stores should be in more numbers. Options for both spot buy and home delivery will be provided to customers that will entirely depend on customer’s demands for the either of the option. Products will be arranged as per the online format which is to arrange a single item from different brands in the same shelf. During the occasional discounted scheme, the discounted products will be arranged in a similar way but, in different shelves, so that, it is identifiable. In context of the parcel conundrum published in BBC NEWS dated 6th July 2012, Lidl can also use the Smartphone app designed by Blackbay (BBC News 2018). The app will enable Lidl to trace its customers in locations other than their homes. The app acts as a location finder which can be a good strategy to reduce the frequency of undelivered goods. Shipments for return or undelivered goods are an additional burden on the company. Hence, the app designed by Blackbay can certainly help to reduce the frequency of undelivered items and will cut down the costing involved in the shipping of undelivered items as well. Lidl will also be able to prove its concern for environmental sustainability as the number of customers turning to courier agency will get reduced and hence, the use of vehicles. A reduced use of vehicle means a lessened emission of CO2 which has remained a challenge for the global world (Jain, Bhatia and Pathak 2014).
The recommended digitalisation to Lidl can expectedly develop a new world of shopping and help to put a strong competition to the target market sector which is both the online and offline shopping platforms. Customer should have reasons to visit to stores and that are its accessibility to a wider people & also the integrated innovative strategies as discussed above. The number of stores, therefore, should increase. The option to go product less must expectedly be noticed by customers in specific the Millennials. Young generations used to have packed schedules. Hence, they may have some other works apart from doing the shopping. It can be a good experience to them if they are asked for not to carry their purchased items wherever they go. Such strategy will be useful them when they need it the most. A home delivery option on an optional basis can be a good choice for customers.
Benefits of the Recommended Model
Lidl had been using a business model which has produced better results than the one used by Tesco and Morrisons. The ‘Every Day Low Price’ (EDLP) is an attractive model for consumers but, troublesome for the retailers. They had found this challenging to meet the supply and demands (Haleem and Jehangir 2017). On the other hand, Lidl had efficiently managed the supply chain operation by closely working with suppliers and forming the strategic alignments between business and suppliers (Kwon, Hong and Kim 2017). The recommended model for the hybrid facilities should also be managed effectively by Lidl. The suggested strategies such as to follow the “Adjacency model” can be a further boost for the already successful company in the form of Lidl. The shopping experience will be redefined with this model and hence, customer loyalty will also increase. It just need to maintain the effectiveness of its supply chain operations, so that, it remains cost-effective and quality-oriented as well.
Root Definition: “A physical store owned by Lidl seeks to enhance the shopping experience of the UK customers by introducing technological interventions in its stores. A new business model with features like enhanced technological interventions is the future of Lidl. The company will maintain its effectiveness in respect to cost-effective and quality oriented service by working efficiently with suppliers. Lidl UK is intended to define a new experience of physical stores for customers”.
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