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Germany: Lidl wants to start its own smartphone payment system

by Henryk Hielscher

Anyone who is currently shopping in a Lidl discount retail chain stores (owned by German Schwarz Gruppe) can hardly ignore the discounter's loyalty card app.

With the Lidl Plus customer card, the discounter has taken up the fight with Payback & Co. But the real advance is yet to come: the app is to be upgraded to a digital payment system.

In the entrance area of ​​the stores there are blue and yellow advertising flyers, at the checkout the sales employees ask: “Do you already know Lidl Plus?”. Anyone who is currently shopping in a Lidl store can hardly ignore the discounter's loyalty card app. The permanent presence seems to be working: the smartphone app has already been "downloaded several million times", says a company spokesman. The group is thus in a good starting position for the next step: the app is to be upgraded to a digital payment system.

The discounter launched its digital customer card a month ago, following similar examples from competitors such as Rewe (Payback) and Edeka (Deutschlandcard) in the highly competitive food market. Like Aldi, Lidl had not used such a system for a long time. The change of course now seems to be successful. "Since its official launch, the app has almost consistently been number 1 on the download charts in both the Google Play Store and the Apple App Store," says Lidl. The most important argument: price advantages.

After successfully registering online in the app on the smartphone, customers receive a welcome discount from a purchase of € 30 (US$ 35.25), and there should be direct price advantages for individual products and competitions in the form of digital scratch cards. First, the discount codes must be activated on the mobile phone. In order to benefit from cheaper offers, customers - similar to the competition - have to open their app at the checkout and hold it in front of a scanner.

They started “in Germany with the central functions”, says Lidl Digital Managing Director Dominik Eberhard, “but deliberately did not want to overload the app”. Gradually, however, extensions are to follow. Probably the most important: an integrated payment function. "The payment function will be one of the next enhancements for the German app," Eberhard announced to German economy expert magazine 'Wirtschafts Woche'. In Poland and Spain it is already possible to pay with Lidl Plus today. There, customers can store their credit card details in the app and pull out their smartphone at the checkout.“ In Germany we are currently developing a direct debit payment system. Other retailers cooperate with providers such as Google Pay or Apple Pay. The drugstore chains dm and Rossmann also work together with the payment service provider Alipay. However, so far mainly Chinese tourists and Chinese living in Germany have used the offer. Samsung Pay is also due to start soon in Germany.

Why doesn't Lidl also use one of the existing systems? The reason could be the fees that merchants have to pay for electronic payment transactions. In addition, many retailers are not comfortable with providing data to outside companies. Especially not when they are growing as fast as Lidl.

Breakfast coupons for the morning hours

Initially, the discounter wants to use its app for customer loyalty and as a marketing tool anyway. The importance of the flyer as an advertising medium is "tending to decrease," says digital boss Eberhard. The discounter now wants to use an app to show its customers special offers on their smartphones, but also to increase sales in the branches in the long term. Unlike the competition, Lidl focuses more on the marketing of individual items.

"We do not want to create another system for collecting points, but rather give users discounts on specific products," said Eberhard. There is also the possibility of playing coupons on the app in certain time windows and thus influencing customer frequency in the branches. “In Berlin, for example, there were breakfast coupons for the morning hours from 7 am to 9.30 am - that was used intensively,” says Eberhard.

Before Lidl Plus was launched on the German home market, the Group already gained experience in eleven European countries.Overall, a three-digit number of employees in a founded digital hub in Barcelona, Spain, takes care of the operation of the app.

About 20 years ago, the pioneer for nationwide loyalty cards in retail was Payback, which is now part of the US credit card company American Express. Discount and premium promises, for example for collecting points, ensured a run on the newcomers in credit card format, today the main business here is also in smartphone apps.

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