Consumption Behavior - Comparison of SPAR and LIDL

Table of Contents

1 Introduction

2 Way of Investigation and Sources

3 European Food Market
3.1 Overall Situation and Trends of Evolution
3.2 Recent Changes in the Market

4 Presentation of SPAR
4.1 History and different Markets of SPAR
4.2 General Management
4.3 Marketing Activities

5 Presentation of LIDL Stiftung & Co. KG
5.1 History and current Position of the LIDL Stiftung & Co. KG
5.2 Marketing Strategy and Communication
5.3 Critics

6 Discussion and Comparison
6.1 Strategies
6.2 Marketing Activities

7 Conclusions

1 Introduction

Recently certain serious changes in the dynamic retailing sector could be noticed. Changes in the market environment, and a certain adjustment of the customers’ needs, demand for a reaction in the market. Satisfying these changing needs, the importance of discounters in the retailing branch was more and more strengthened, since these markets are beginning to better meet the needs of the majority of customers in the market. Consequently discounters face a certain success and were able to grow and to capture new market shares of other retailing institutions by generating more and more sales.

Therefore the aim of this paper is to provide a description of the current situation and the further expected development in the retailing market in Europe. To stress the importance of the discounters’ influence on the market as well as the difference between different market’s institutions satisfying various and differing needs of differentiating groups of customers, a comparison of an exemplary ordinary retailer, SPAR, and an exemplary discounter, the LIDL Stiftung & Co. KG, is provided. Within the whole retailing industry, the food branch provides an exemplary market to work out these differences among discounters and ordinary supermarkets. In this market, discounters faced a certain success and customer changes could be more clearly and numerously recognized.

2 Ways of Investigation and Sources

To reach this goal, first of all the overall situation as well as the expected development of the retailing industry are described in detail. Further on, explicit descriptions and analysis of the companies SPAR and LIDL concerning their structures, target groups, managements, marketing activities, their general performance and their further development will follow. After this, both companies will be discussed and compared concerning these criteria. Finally, a conclusion will summarize the main outcomes of the investigation.

Gathering information to reach this goal, different sources of information were used. First, descriptions of the companies themselves were used to present the enterprises and their processes. Secondly, as that information can be described as rather subjective, information from articles, magazines and third-party sources was gathered and analyzed. These articles and essays were as well used to get information and background-knowledge concerning the current situation of the retailing-market. Third, to prove the opinions and positions in the paper, data provided by the different European Federal Statistical Offices and the market research institution A.C. Nielsen GmbH in Frankfurt, Germany were conducted. Finally, to get a certain theoretical background concerning definitions and the retailing industry in general, the book ‘Retailing Management’ by Michael Levy and Barton A. Weitz was taken into account.

3 European Food Market

3.1 Overall Situation and Trends of Evolution

Reviewing the European grocery market in 2001, we observe that in terms of relative importance, the four big markets of France, the UK, Germany and Italy are way ahead of the rest of Europe and account for 65.1% of the total. The markets in eastern European countries are achieving the fastest rate of growth by a large margin. Hungary and Poland are two leading giants in the development of retailing grocery industry, followed by the Czech Republic, Portugal, Ireland and Greece (Perkins, 2001).

While Europe is often viewed as a single market, different countries and regions are experiencing differing levels of general wealth and retail market development. Some are growing faster than others, while some mature western markets are showing no growth at all in retail grocery sector. Across much of Europe, the food retailing is falling as a percentage of all retail sales. This mainly reflects the fact that as consumer wealth rises, so a greater proportion of disposable income is spent on non-essential goods and services rather than foods. As the consequence, food retailers have been exploring larger retail market share in eastern European countries where the food sector is still immature and supermarket development is moving ahead rapidly (Perkins, 2001). A great number of retailers are gradually shifting their business focus into the countries that have the potential of demand and development. The European grocery market is spreading out quickly and widely.

Globalization is another prevalent trend in retailing today. A number of European retailers are developing genuinely global operations. To do so successfully, companies need to have a focused strategy, but also a real ability to adapt to local conditions. The tune of “think globally, act locally” is easier said than done and many retailers have learnt this lesson the hard way (Perkins, 2001).

Discussing about a food retailing market, supermarkets are the most common deliverers of this type of business. They are also the most frequent places where consumers can purchase foods. In this paper, we deem to use two well-known supermarket chains to explain and reflect the food retailing industry. Therefore a short but precise definition of supermarket is needed here. A supermarket is a large self-service food shop. Self-service means an arrangement where the customer collects the goods required and takes them to a check-out point. The customer has access to the goods and may inspect them without the mediation of a sales person. Self-service does not necessarily lead to the growth in size and the combination of several trades which are features of the supermarket. However, self-service in the food trades transcends the limitation that it has led almost immediately to larger and larger scale, including the combination of different trades and the enrichment of the stock assortment. Once this occurs, important economies of scale become available (McClelland, 1962).

Now, after having considered the market and its main characteristics, one should have a look at its biggest trends of evolution. First, the consumer lifestyles are changing: the decline of the home-cooked meal is accelerating in Europe, to the benefit of the “ready-made options” or eat out options. The changes in consumer behaviour and demand are indeed driving the market for ready meals in Europe, as consumers are working longer hours, spending more time in transportation and thus they have a growing desire to maximize their leisure time. The ready meals food industry is expected to rise to £8 billion, representing an average of £170 per person next year.

Second, at the same time, the ethnic food sector is also about to meet a boom, rising from a market value of £1.4bn to £5.3bn over the next three years. The UK accounts for more than half of the total European packaged ethnic food market, and is the only European country where these goods account for more than 1% of the total packaged food sales. Indian food is currently the market leader.

But foods marketed as ‘natural' are also steadily growing in popularity. According to the market researchers Mintel, this is mainly due to the fact people associate the term “natural” with healthy. Around 5% of new product introductions are characterized as ‘all natural', according to Mintel. The food producers and retailers are increasingly playing the card of the trend for healthy, functional foods. (not only fad products but a real long-lasting trend). But there is still this confusion in consumer perception between “natural”, “organic” and “ethical”. Actually, most of the consumers are buying products that use 'natural' on packaging, as they see it to be closely related to 'healthier'.

Another state of fact, which is driving the diet and health food industry, is the high percentage of overweight or obese population: for instance, 61.6% of British consumers are now overweight or obese, compared with 54.2% Europe-wide. The healthy food industry is thus expected to reach £5.3bn by 2009, representing an expenditure of almost £90 per head each year. Retail analysts predict ethical concerns will boost the organic and fair-trade markets, influencing the choices consumers make for premium fruit, vegetables, dairy and meat.

On the British market, the number of loyal organic consumers is predicted to increase dramatically to 36% of the population. In market terms the growth will be staggering - from £4.5 million in 2004 to more than £21m in 2009.

This concern is also taken into account by a great number of retail businesses: Recently both Tesco and Asda have implemented fair trade campaigns, aimed at raising consumers' awareness of the retailers' supply chain policies. Likewise, some businesses are recognising the commercial value of ethical trade policy. Food giants Nestle has introduced 'Partners', a fair trade coffee brand, and Cadbury has acquired ethical chocolate company 'Green and Blacks'.

Being aware of those main trends on the food market might help ready-meals manufacturers, distributors and retailers to anticipate future changes in the ready-meals market and develop new products and strategies to secure market share.

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