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Budget chain Lidl challenges Finnish retail food giants

Ten years ago the German budget supermarket chain landed in Finland to challenge the well-established domestic franchises.

Kassalinjoja Lidl-myymälässä.
Image: Marjut Suomi / Yle

Lidl began its operations in Finland with ten box movers and has now expanded to encompass some 140 locations across the country.

During its ten years in Finland Lidl has grown to become a favourite with budget conscious shoppers, at the same time putting up a healthy challenge in the retail food market.

Its customers' have adapted their expectations to the no-frills offering, thereby boosting business for the German chain.

The chain competes on the basis of affordable prices, an international product offering and minimal advertising.

The franchise introduced the new model in Pirkkala on the outskirts of Tampere. Residents Viljo Eskelinen and Camilla Hanhioja were immediately sold on the concept.

“Let’s say that I do the vast majority of my shopping here -- about 80 percent -- and the rest elsewhere,” Eskelinen said.

For her part, Camilla was seduced by the selection of sweets on offer.

“Basic fruit and bread are affordably priced and suited to a student’s budget as well,” she expanded.

Stiff competition for S- and K-Groups

Since its arrival Lidl has been able to cement its market share in the Tampere region at around six percent. The chain is now present in about ten different locations in the region.

The new kid on the block has inspired the dominant market leaders -- the Kesko and S-Groups to step up to the challenge and offer their own lines of budget products.

“Lidl’s strong emphasis on price has touched customers in a completely new way,” said Jukka Tornberg, local manager of the Tampere Kesko supermarket.

Not fully suited to Finnish customers

In spite of Lidl’s undisputed position at the low-priced end of the retail food market, the German model hasn’t always meshed seamlessly in Finland.

In Finland, Lidl has had to lengthen its cashier points, introduce shopping carts and increase the proportion of local products.

Prices have also moved away from the norm present in central Europe, said Lidl area manager Virpi Kaikkonen.

“Every country has its own base pricing and different types of taxes. Finland’s location here in the north also creates its own logistical challenges,” she pointed out.

Recession reining in network expansion

Lidl plans to focus on refurbishing its existing outlets rather than expanding the network.

Other chains are also reining in development of the network in the Tampere region, Kesko's Torberg said.

“The network will continue to develop, but of course the economy which is now in decline, could slow down the pace of investments,” he added.

Sources: Yle

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