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Germany: from discounter to technology giant: How the Schwarz Group is reinventing Lidl

Updated: Apr 14

Discount Retail Chain Lidl's owner Schwarz Group is an exemplary transformation into new business areas and the modernization of the "old".


The Schwarz Group, which includes discounter Lidl and supermarket Kaufland, was long considered the epitome of conservative German retail. But while many reduced the company to cheap food and brochures, a huge change has taken place behind the scenes:

Step by step, the group is transforming itself into one of the most ambitious technology providers in Germany with its own data centres, cyber security services, a cloud "Made in Germany" and massive investments in artificial intelligence.


This transformation is not a PR gag, but part of a radical strategic realignment that rests on four major pillars and cleverly transforms a mistake of the past into a strength.


1. Digitization of retail: Lidl Plus, omnichannel and e-mobility

A first building block was the introduction of the Lidl Plus app. What started as a pure customer loyalty program is now an intelligent tool for personalized advertising, digital coupons and data analysis.


Particularly innovative are, for example:

The integration of e-charging stations directly into the app. This allows customers to locate charging stations, start charging processes and pay, a clever step to promote app use and customer loyalty.


The Schwarz Group consistently pursues an omnichannel strategy. The goal: Customers should be able to switch seamlessly between the online and offline worlds, for example through click & collect or real-time availability in the store. A digital infrastructure that makes classic retail models fit for the future.


2. Cybersecurity: From protection to business model

In 2021, the Schwarz Group acquired the Israeli cybersecurity start-up XM Cyber, founded by a former Mossad chief, for around 700 million euros. They were joined by Cyber Observer, another IT security company. Both were initially used for their own security, but have since been successfully sold to companies such as SAP or Commerzbank.


A hidden Cyber Defense Center in Heilbronn, which is more reminiscent of science fiction than a discounter, shows how serious the company is: Cyber security is no longer a marginal issue, but a central component of the business model.


3. Cloud Computing: Stackit as a German AWS Alternative

The Schwarz Group has done what Amazon did with AWS: Under the name Stackit, it developed its own cloud infrastructure, initially only for internal purposes, such as for the IT systems of Lidl and Kaufland. But inquiries soon came from outside. The big difference to US providers like Amazon or Microsoft: Stackit's data centres are located exclusively in Germany and Austria and meet the strictest data protection regulations.


This is a strong selling point, especially for medium-sized companies that need to handle customer data sensitively. Stackit is thus positioning itself as a European, data protection-compliant alternative to hyperscale's from the US or China.


4. Artificial Intelligence: Relying on Aleph Alpha and IPAI

The Artificial Intelligence Innovation Park (IPAI) is a true flagship project being created in Heilbronn. By 2027, several thousand experts will be researching, founding, and developing AI technologies on up to 23 hectares, initiated and largely financed by the Schwarz Group and its charitable foundation.


The central element: the investment in the Heidelberg-based start-up Aleph Alpha, which is developing a language model as a European alternative to ChatGPT. The Schwarz Group is not only investing financially, but also intends to use Aleph Alpha to develop AI applications that run directly in its own cloud, including in-house cybersecurity.


This all creates a seamless ecosystem: Cloud + Cybersecurity + AI from a single source, Made in Germany.


A quote from Gerd Chrzanowski, CEO of the Schwarz Group, "Our IT manages around seven billion customer contacts annually, we know one in three Europeans personally. If medium-sized companies also use our solutions, this hardly makes a difference in the system. At the same time, we are constantly learning through internal use and competition with global technology companies is constantly driving our quality higher."


This may frighten some people. But it also demonstrates the clear strategic approach that is consistently pursued here.


Costly Mistakes and Smart Consequences

The Schwarz Group's digital success story was by no means predetermined. On the contrary: The company suffered some painful IT flops. Particularly well-known is the failed SAP implementation project, which was cancelled after seven years and an estimated investment of over €500 million.


But instead of becoming paralyzed, the group drew clear conclusions: more control over IT, more in-house development, and a greater focus on lean, customized systems. This learning process formed the basis for today's digital success and shows that even setbacks can become the driving force behind transformation.


"In 2024, around 400 employees from the digital division Schwarz Digits will return to Lidl to drive digitalization directly in the store business and to more closely integrate the brick-and-mortar and digital worlds."


This clever step demonstrates that digitalization will not only be centrally managed, but also concretely anchored in the day-to-day operations of the stores and processes, a clear signal for a practical transformation.


Conclusion

What Lidl and the Schwarz Group have achieved is impressive: from a brick-and-mortar discounter to a tech group with its own cloud, cybersecurity solution, and AI research campus. And not despite, but also because of past mistakes.


If you look closely, you will see in Lidl's history a blueprint for how even traditional companies can reshape their future with smart, focused, and collaborative digital strategies.





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