Lidl has purchased a plot in Riga, Latvia intended for retail use the TV-channel Latvijas Televīzija (Latvian Television) reports. The chairman of Latvian Traders Association, Henriks Danusēvičs also confirmed the German retailer has taken a step towards entering Latvia by acquiring a plot intended for a wholesale base. According to the news portal Sputnik News, the mayor of Riga, Nils Ušakovs also confirmed on Facebook that Lidl stands behind the land acquisition in the city part of Purvciema.
We have expected Lidl to enter Latvia and Estonia ever since it decided to open its first stores in Lithuania, which showed its readiness to operate in these small but highly competitive Baltic markets. LZ Retailytics already reported Lidl’s plans to enter Estonia earlier this year, and this time it is the very same developer, SIA MMS Property, with confirmed ties to Schwarz Group, handling the transaction. This raises the likelihood of both entries in our opinion.
Entering all three Baltic states makes sense for Lidl as it will be able to realise buying and logistic synergies in the region similar to those reached by the behemoths active in all three countries, Ica Gruppen and Maxima. These two would also be the main competitors in Latvia, but the task of quickly generating volumes in the country would arguably be easier than in Lithuania and Estonia.
Apart from the two market leaders, a significant share of the market is held by small cooperatives and franchisors lending their concepts and services to even smaller independent chains and merchants. This is a challenge that the proven European concept of Lidl could surely handle. The discount opposition comes in the form of Ica Gruppen’s Supernetto, which the Swedish retailer is currently partly converting to its supermarket banner.
The entry strategy of Lidl would likely be similar to that seen in Lithuania, where it targeted the outskirts of large cities with the aim of quickly building up a nationwide store network. The market impact would likely be equally drastic, with competitors trying to match prices through promotions and increased private label shares. LZ Retailytics expects Lidl to seize third position in Lithuania by 2022 through 112 stores and this could be achieved in Latvia as well. Especially considering that Finnish S Group recently exited the market with its price-focused Prisma hypermarkets.
Schwarz Group had plans to enter both Latvia and Estonia back in 2006 with plots purchased and employees hired. However, it gave up on the project as it likely identified other markets with more potential. Since then both Lidl and Latvia have matured, with Lidl now operating more supermarket-like stores, fit for discount-shy Latvians and Latvian shoppers being more used to private labels.