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Lidl, the German multinational hard discounter, prepares for a large scale expansion in Central and Eastern Europe. This will have a major impact on competition in retail trade. A brutal price competitor, Lidl will put pressure on already poor wages and working conditions in the whole commerce sectors of the new host countries.

According to the 7 February issue of German industry newspaper Lebensmittelzeitung, the start of operations is imminent in the Czech Republic and Hungary, whereas preparations are on their way in Croatia, Slovenia and Bulgaria. Last year, Lidl established a presence in Poland.

Commercial workers and their trade unions have reason to be worried about Lidl's expansion to new countries in Europe. Its discount concept puts pressure not only on competitors and suppliers, but also on the wages and employment conditions of retail workers all through the industry. In Finland and Norway, two recent host countries, the German multinational has joined the employers' associations and adopted the collective agreements. But the real risk has to do with focusing on low prices at almost all costs, which can prove to be a real job killer and conditions cutter also in competing companies.

The Czech Lidl chain will be launched through a 'big bang' in June. Between 30 and 50 supermarkets will open their doors simultaneously. A 36,000 square meter distribution centre has already been built close to the capital city Prague.

The Hungarian store network will also start to unfold this year, where the German discounter takes on a very expansive and competitive Tesco, the British multinational which is now the country's largest trader. Tesco has recently concluded a social partnership agreement with UNI Commerce affiliate KASz.

Lidl has recently opened offices in Slovenian capital Ljubljana and Croatian capital Zagreb, to prepare its establishment, probably next year. Having entered the Finnish and Norwegian markets during the last two years, Lidl is set for a start in Sweden and Denmark as well. Also Estonia, Latvia and Lithuania are said to be among the target countries.

In Slovenia, a domestic multinational Mercator will have to prepare for a rougher compeition climate as the German discount giant arrives. In Croatia, Rewe subsidiary Billa has been building up a presence and will now face new challenges. Whereas Mercator is a difficult company for the Slovenian commerce trade union, UNI Commerce recently succeeded to bring Croatian labour relations with Billa back to a constructive track.

Worried about growth of discounters

Lidl has been highly successful with its discount concept. Its approach is raising concern among competitors. In an interview in the same issue of Lebensmittelzeitung, Rewe CEO Hans Reischl warns that the extremely rough price competition by Lidl and other hard discounters will not be able to continue without affecting the qualoty of food.

"A continued downward price spiral can, in the medium term, not be in the interest of commerce or the producers, and particularly not in the interest of the consumers", Reischl says, adding that something must be done - in the interest of society - against the growth of the discounters. He refers to restrictions on the establishment of discounters in Spain, Italy and France, setting a maximum size for discount shops or conditions concerning the assortment: "Only the Germans allow the same floor space for all types of stores. This is the most stupid thing that one can do."

Pressure on collective agreement benefits

But also the commerce trade unions should be concerned about the fast growth of the discounters - one of which incidentally is Penny Market, a Rewe subsidiary. With their focus on low prices and limited assortments, they push the whole retail industry in a direction which is not favourable for the workers.

Disciunters employ much part-time and short term personnel, which pushes competitors with a more developed personnel approach in a negative direction. The result can be a pressure on unions to accept concessions in collective bargaining, which in the countries of Central and Eastern Europe with low wages and poor benefits to start with would be particularly devastating.