As the threat from Covid-19 became apparent in February, Lidl set up an Irish business continuity team. Soon it was meeting seven days per week to update the retailer's board. Lidl's Irish management then contacted their colleagues in virus-ravaged Italy for advice. The response was sobering.
“They told us to get ready for what was coming,” says JP Scally, the 38-year-old Westmeath man who is Lidl’s chief executive and chairman in Ireland. His Italian colleagues advised Scally to stock up on sanitiser and Perspex screens.
“Nobody else here was ordering Perspex yet. They told us to prepare for restrictions. They had been caught unawares and one of their distribution centres ended up in a lockdown. Their knowledge gave us a huge advantage.”
By March 12th, customers were panic buying. Lidl recorded its busiest ever day in the Irish market that week. The Government convened discreet meetings with industry leaders to discuss how to dampen the fear. It was the craziest time in the German retailer’s two decades in the Republic.
“The run on toilet paper is an example. It started in Australia and, for no logical reason, it spread,” says Scally. “We had no problems at all with procurement. We could buy it easily. But people were panicked and afraid. It shows the impact of social media and herd mentality. Once that starts, it is hard to stop.”
Lidl, which celebrated its 20th anniversary in Ireland last month, has emerged from the coronavirus lockdown in a stronger position than ever before. It has pulled ahead of its German rival Aldi with a market share of 12.7 per cent. Through the lockdown period, the grocery market grew by 23 per cent, but Scally says Lidl's share increased by "between 25 and 30 per cent".
It hired 700 extra staff to cope and is pressing ahead with an investment of €250 million expanding its network, including €75 million on a new logistics hub in Mullingar. With 6,000 staff and 202 stores on the island, including almost 40 in the North, it will open about another dozen stores between this year and next. Its Irish sales are now “well in excess” of the €2 billion barrier.
Focus on price
Scally, who joined Lidl from college and took the reins five years ago, looks relaxed as he leans back in his chair at its Tallaght headquarters and looks forward to the upcoming recession. The last downturn cemented the two German discounters’ place in the Irish grocery market, and their incumbent rivals have never fully recovered.
“Price never lost focus for us over the 20 years. While we developed our ranges, we have always been committed to being the cheapest. So the next recession will serve us well. It is also coming at a time when we’re expanding our store network. People will again be focused on value for money,” he says.
“But this time, we also have a reputation as somewhere where you can do your full shop. You’ll see even more people switch from mainstream retailers to us. Maybe even a new cohort.”
Although keen to talk up the business, Scally is surprisingly lukewarm about the prospects for online grocery shopping.
Last year, Lidl launched online shopping for customers in the Dublin region, using a third-party app, Buymie. Won’t people want to shop even more online this winter to avoid queuing outside supermarkets in the rain?
“The queuing is not as big an issue at it was during lockdown. People are seeking out quieter periods to shop. Look, there is a lot of talk about online, especially in the media. But people forget that it is only about 3 per cent of the market. It is very small. The majority of people don’t use it. The safety measures we have in stores are appreciated. As long as queuing is not a factor, online is not going to have the impact that some commentators might predict.”
Scally says he plans to grow the business “through more traditional channels” – bricks and mortar: “One way or the other, the customer has to pay more to have a product delivered to their door. The majority of people are not yet prepared to pay that premium.”
Lidl’s pre-virus plan to open about another 50 Irish stores remains unchanged. After a lockdown construction hiatus that stalled some projects, Lidl will open six new outlets this year, including stores in Ballymun, Adamstown and Clonsilla. A further six will open next year, while another dozen or so existing stores will be extended or rebuilt over the two-year period.
One of the new stores will be in Dublin city centre, adjacent to the headquarters of Dunnes Stores on South Great George's Street. The genial Scally will be able to wave at the Heffernans who run his larger rival. They might even wave back. "Ha! They might," he laughs.
Loyalty scheme
Lidl has a highly regimented business model based around ruthless simplicity to keep costs down. But in recent years it has also begun to ape some of the bells and whistles of its rivals.
In recent weeks, for example, it launched a loyalty scheme, Lidl Plus, delivered entirely via an app. With the exception of a few days when it was displaced by the Covid tracker app, it has held the number one spot in the download charts. As of nine days ago, it had been downloaded 408,000 times.
Lidl is also planning a wider rollout of in-store orange juicing machines, after trials in Rathfarnham and Drumcondra. An Post is also installing parcel lockers in some of Lidl's car parks, while Scally expects it to open more in-store post offices – there is already one in its supermarket in Castleknock.
“We can’t allow ourselves to become distracted, and we’re good at efficiency and simplicity. But simplicity doesn’t mean you can’t innovate – the loyalty app is an example of that. At the moment, the An Post thing is on a case-by-case basis. They have locations they’re interested in, and so do we.”
While lockdown was boomtime for grocers, Scally is happy to see the back of it as it was “too busy at times”. Remarkably, given the hordes of people visiting its stores each day, just 10 Lidl staff members in the Republic tested positive for the virus, and a further three in the north. All were isolated cases.
“When most other workers were staying at home during lockdown, ours were getting up at six in the morning and going into work every day to keep shelves stocked. There was a sense of pride in being essential workers for the country.”
Scally and Lidl, undeniably, have had a good lockdown. The challenge now switches to negotiating the economic downturn that will be its fallout.
