Why Lidl Keeps Its Distance From Retail Media, AI Pricing as Others Double Down
While some (many) retailers are heading full speed into retail media, Lidl US isn't one of them. In fact, if you ask CEO Joel Rampoldt, it will never be one of them.
"I wanted to be very careful about this because I see a danger here that if you focus so much on retail media, you become a retail media company," he told the Path to Purchase Institute at Groceryshop last week. "I never want us to be — and Lidl does not in any country want to be — a retail media company. We're a grocery store."
Given that about 80% of the grocer's products are private label, it's understandable that it wouldn't be a top priority for the company. He described Lidl as being "way behind the curve" with retail media and data monetization.
"We are a private brand company, and therefore our opportunity for retail media is just smaller," he noted. "It will always be smaller, but even across the part of our business that's branded, we're still probably behind the curve. We're not at zero, but we're behind the curve."
[See also: Lidl US refreshed its brand last year]
Rampoldt's hesitancy stems in part from seeing some other companies using it to drive decision-making instead of what's best for the customer and operations.
"There are companies [at Groceryshop] who are retail media companies. They just happen to have grocery stores. … I wish them all the success in the world. That's not the path we want to go down."
While he said retail media will likely receive more emphasis in the future, Lidl will remain guarded about how it fits into its larger decision-making.
"I'm very cautious about the way we make decisions about product and pricing and promotion and placement being driven too much by the gusher of money coming right from retail media," he said.
Personalized Shopper Experiences
While retail media investments aren't at the top of its tech roadmap, improving personalized omnichannel experiences are, including through its mobile app.
Like many grocers, Lidl collects a wealth of consumer data through its app, and when it comes to the crawl-walk-run journey of leveraging it for personalization, Rampoldt described the company as being "halfway between crawling and walking."
As part of this, Lidl is experimenting with serving new customers with category recommendations that it knows it performs strongly in and are more likely to get them to return. Recurring customers, meanwhile, may receive recommendations and promotions for categories or subcategories that they've never purchased to see if it can spur a new trial.
"We've corralled the data. We understand better how to process it. We have the computing power to be able to do that, and we're starting to execute small trials on personalization efforts and getting some good results," he said. "It's not yet an industrialized personalization machine like I think will ultimately become."
AI Use Cases
Also like most grocers, Lidl is exploring increased usage of artificial intelligence within its business, and Rampoldt was most optimistic about its effectiveness within the supply chain.
"Supply chain is one of those areas where — in our company, and I think in many companies — there's still too many instances of too many humans having to touch every decision," he said. "When what you really want is AI making partially formed, 80% decisions and then having smart humans oversee [them and make adjustments]."
However, Lidl will never use AI for pricing, he stressed, saying that price optimization software fuels higher prices it usually deems an optimal price for a business to be higher.
"We're the opposite. We want prices as low as possible, and we want our cost structure to let us be profitable and do great in a market where we're putting constant downward pressure on prices," he said. "The AI application for pricing is always looking [where] can we go up? Maybe I can go down a few cents on this, but [then] I want to go up on all of these other things.
"It's just the antithesis of the way we think about pricing."
