Interview. Frank Wagner: Lidl Romania aiming to harness local supplier network, continue development strategy

Frank Wagner, president of the management board of Lidl Romania, says the retailer is looking to enhance its relations with Romanian suppliers as part of its ongoing development strategy. The company will open 15 new stores in the country this year. Lidl is also planning to streamline its distributon operations in eastern Romania through a new logistics center which is currently under development.

What are the development plans of Lidl in Romania this year?

Just like every other pillar of our activity, the principle behind Lidl’s logistics strategy is efficiency. Expansion and modernization remain our growth drivers, and therefore we are constantly improving our customer experience, as well as using sustainable technologies and development strategies in a responsible way.

Lidl is constantly growing in Romania – we have 226 stores and we are constantly optimizing the supply chain, by organizing our warehouses as efficiently as possible. At the moment, we have 4 logistics centers in Chiajna (near Bucharest), Nedelea (near Ploiesti), Iernut (near Targu Mures), and Lugoj. Last year, we started the construction of our fifth logistics center, in Cordun (near Roman). The warehouse is built in collaboration with a Romanian company and is an extremely important asset for the distribution process in the eastern part of the country. The logistics center will have a total built-up area of 44,960.00 sqm, on a land area of 132,000 sqm. An important factor in choosing the location was its proximity to the European road E85, which makes it possible to optimize the supply processes and thus maintain the average distance of transport to the stores. The opening of the new warehouse will also bring an important contribution to the economic development of the local community, by creating over 200 new jobs, both in administrative areas and operational areas.

All of our warehouse locations ensure optimal supply routes, with an optimal number of stores allocated to each warehouse. This allows us, on one hand, to carefully plan the products’ traceability and maintain their quality and freshness, and on the other hand, to reduce our environmental impact.

The investments we make in our stores and logistics centers support our efforts to minimize resource consumption and reduce the impact on the environment as much as possible. For example, the logistics center in Lugoj, opened at the end of 2016, uses modern solutions and technologies that deliver high energy efficiency standards, with low energy usage and a reduced CO₂ footprint. Moreover, the entire construction process of this building was a sustainable one, generating a significantly diminished impact on the environment. Sustainable investments such as this are one of the reasons why in 2017 Lidl obtained the ISO 50001 certification – an international standard for optimizing energy performance and efficient energy management.

What is the core development market for Lidl in Romania in terms of city or region? What’s the approach in rural/urban areas?

In our development strategy we aim to keep our promise to our customers, of offering products at the best quality-price ratio, in proximity to their homes. Therefore, in our expansion plan we take every region into consideration equally and with the same interest of meeting our customers’ needs. We are already present in every county with at least one store and this year we are planning to maintain our expansion strategy by opening at least 15 new stores. Starting with the beginning of this year, we opened 5 new stores: in Sighisoara, with a unique format and architecture in Lidl’s portfolio, in Balotesti and Tunari (near Bucharest), in Galati, Brasov and Orastie.

However, the core of Lidl’s development strategy is to build a shopping experience for our clients in accordance with their taste, interest in diversity, lifestyle and purchasing power. In our 7 years of presence on the Romanian market, we have learned to create a more efficient experience for our customers and to anticipate their needs. Our expansion process is committed to sustainable development by using advanced building technologies. Thus, each store is equipped with modern solutions and technologies that provide high energy efficiency standards. For example, LED lighting systems with presence sensors and heat recovery systems are integrated into the ventilation systems. All these measures are part of our development strategy that helps us offer our client the shopping experience they deserve.

What’s the relation of Lidl with Romanian producers? What share of the product offering contains products made by local producers?

Developing long-term relationships with Romanian suppliers has always been a priority for us. One of our objectives is to support them in sustainable growth and to create long-lasting partnerships. This helps them to constantly increase their quality standards and to meet the demand of Romanian customers for local products. Every decision that we take in relationship with the local suppliers is according to our strategic guidline of building an efficient partnership, with sustainable outcomes. The results of our initiatives are very encouraging. They are outlined in our first sustainability report, launched in May this year.

For example, “Camara Noastra”, our own Romanian food brand, 100% developed with local suppliers, based on authentic recipes purchased from them, had a significant increase over the reporting period (March 1 2016 – February 28 2017). We launched this project in October 2015 with 43 articles and reached the end of the 2016 with 98 articles, aiming to increase the number by at least 20 percent, until the end of the next reporting cycle. Moreover, the number of the local suppliers for all products increased by 24.12 percent over the reporting period. One of our biggest commitments is to increase the number of local suppliers and consequently the number of SKUs made in Romania.

Nevertheless, we are aware of the challenges that Romanian farmers are facing and we know that their sustainable development is an important factor in increasing the local production of authentic vegetables and fruits. This is why, together with the UNIVERSITY OF AGRONOMIC SCIENCES AND VETERINARY MEDICINE OF BUCHAREST (USAMVB), we developed an ambitious project that aims to offer local farmers technical and procedural support, free counciling sessions and development opportunities. The partnership represents a genuine project of supporting the local economy and a responsible way of doing business with our partners. This partnership also gave rise to the program „Cultivat in Romania, specific romanesc” („Grown in Romania, typically Romanian”), which aims to revive traditional varieties of vegetables. The first results of this program were the Buzau 1600 tomato and Buzau red onion, that were part of our offer during the vegetable season last year. The Romanian tomatoes Buzau 1600 will also be available this summer, in Piata Lidl.

What’s Lidl’s strategy in the digital field, mainly in the e-commerce field? Does the company plan to open an online store locally?

Lidl Romania does not currently have an online shop, which means that one of our challenge is to maximize the conversion generated by online presence into offline sales. We run complex campaigns with offline components (such as radio, print and outdoor), as well as online elements, many of which are innovative. A very recent example is our new brand campaign, in which the manifesto video can be seen online in 2 different perspectives, with the help of 2 different devices – on their mobile phones, people can see the video from the perspective of one character, while on their desktop they can see it from another character’s point of view. For us, it’s important to create memorable experiences for Lidl customers, regardless of context, be it online or offline. Furthermore, we try to keep our customers as engaged as possible with real time conversations in social media, as well as constantly informing them about all the offers in our stores via our website.

What are the main challenges on the local retail market in 2018?

The retail industry offers many challenges, but also opportunities to adapt and adopt new business models for enhancing the customer experience. Like in many other years, consumers have an important role in setting the trends for 2018. They are increasingly mindful of the products they choose, and they are also interested in product diversity. A solid example is their appetite for Romanian products, from vegetables and fruits to other types of products that are developed locally by the hands of Romanian farmers and suppliers. For Lidl, the market’s perspectives are in full alignment with our development plans. One of our main commitments is to increase the presence of locally developed products in our stores and to further grow the Romanian farmers’ potential, on the long-term. Moreover, we pay close attention to our clients’ feedback, so that we can develop products according to their preferences.

Furthermore, in time sustainability will become a very important part of the retail market, as it is more and more important to reduce our impact on the environment and use resources in a more efficient manner. We believe that a responsible way of doing business is to make those choices that are not only good for the company, but for the economy and society. This is why sustainability is part of Lidl’s DNA since we entered the Romanian market. In order to evaluate our CSR results on all our strategic business pillars, in May we released our first sustainability report that respects the GRI standards, a set of benchmarks recognized internationally.

What are Lidl’s expectations in terms of business results this year in Romania?

We are very happy that in 2017 we were able to overpass the market average increase for turnover. It is a very big achievement and I am proud of my team who did such a good job. We plan to do the same this year. On the local business landscape, we are in the top 3 retailers, and our business model – to offer our customers the best quality-price ratio – differentiates us from competitors. Our priority is to maintain the upward trend of market expansion with at least 15 new stores each year and to reach the next biggest milestone of 300 stores nationwide. Of course, this expansion will be reflected also on the local labor market, by creating new job opportunities.

What investments does Lidl plan in Romania this year?

After our ambitious investment in our headquarter, one of the most sustainable buildings in Romania, our next plans for 2018 are at least equally big. We will continue to expand our number of stores and to develop our logistics centers. . Currently, Lidl has four warehouses (at Lugoj, Nedelea, Iernut and Chiajna) and the fifth one is under construction at Roman that will be operational next year. We are also focusing our resources in supporting our CSR pillars (products, environment, employees, partners and society), which are part of our business strategy. While the first four pillars are addressed mainly, but not exclusively through measures that shape the way we do our business, the latter is covered through dedicated long-term social investment projects. For example, we will continue our strategic partnership with the UNIVERSITY OF AGRONOMIC SCIENCES AND VETERINARY MEDICINE OF BUCHAREST (USAMVB), to support the local production of vegetables and fruits, but also to bring Romanians the taste of authentic products, through projects such as “Grown in Romania, typically Romanian”, dedicated to bringing back to life traditional Romanian varieties of vegetables and fruits. At the same time, our attention is directed to the introduction of new locally developed products, with traditional recipes, in our „Camara Noastra” range.

When it comes to our investments in society, we will continue the program „Impreuna cu Lidl pentru un viitor mai bun” (“Together with Lidl for a Better Future”) hosted by the Lidl Community Grants platform, which aims to support projects with long term impact in the fields of education & environment, implemented by NGOs. With an investment of 650.000 euros, this year, we will support 20 non-governmental organizations in developing projects with long-term impact on education and the environment. The platform was developed last year, when Lidl organized the first project contest for NGOs, and 18 projects were supported. In addition to fund raising campaigns at cash registers and fund-raising associated with product purchases from Back to school and Christmas offers, the platform is one of the ways in which Lidl engages in society for a better future. This year, among the projects selected are initiatives to develop students skills (soft skills, critical thinking, public speaking), food waste management, selective collection, recycling and urban ecology, as well as educational approaches to protecting the environment.

What have been the sales recorded by Lidl Tour locally and what are the plans for this year for this business line?

With a unique concept in tourism, Lidl Tour is appreciated by our clients for the best quality-price ratio of trips and for the additional benefits or facilities included in the packages’ costs. We are very proud of the team’s results and very happy with our turnover growth of 150%. For this year we expect to double our business figures, especially as, in June, Lidl Tour celebrates an important milestone: 2 years of activity with more than 15,000 clients and 800 holiday packages. After 2 years, Lidl Tour is more and more present among the customer’s preferencs, therefore, to celebrate our achievements, we are offering a premiere on the local market: the first charter offer for Morocco, with four types of holiday packages, with direct flights from Bucharest to Marrakech.

Lidl announced the launch of an IT center of excellence in Romania? Will Lidl Romania use any of the solutions developed here?

Lidl Digital is positioned in the top of the technology hubs in Romania. We are very proud that in Romania we will have the second largest Lidl Digital hub after Germany, where the company has been developing digital platforms for over ten years. Now, we have the opportunity to contribute to Lidl’s global digitization strategy and develop complex and creative projects that will set the digital trends. We plan to hire more than 100 IT specialists in the upcoming period to support the Lidl international network in enhancing e-commerce innovation and assuring all the activities needed to operate and optimize the digital platforms in the group, from Romania.

DMCA

PROTECTED