The company was founded in the 1940s by a member of the Schwarz family, and was called Schwarz Lebensmittel-Sortimentsgroßhandlung(Schwarz Assorted Wholesale Foods). Lidl has since its opening in 1973 established itself in over 20 countries throughout Europe. The name Lidl is the surname of a former business partner of Josef Schwarz's, Ludwig Lidl, a retired schoolteacher, and Josef's son Dieter Schwarz bought the rights to the name from him for 1,000 German Marks, as he could not use the name Schwarz Markt; Schwarzmarkt means "black market". Lidl is part of the Schwarz Group, the fifth-largest retailer in the world with sales of $82.4 billion (2011).
In 1930, Josef Schwarz became a partner in Südfrüchte Großhandel Lidl & Co., a fruit wholesaler, and he developed the company into a general food wholesaler. In 1977, under his son Dieter Schwarz, the Schwarz-Gruppe began to focus on discount markets, larger supermarkets, and cash and carry wholesale markets. The first Lidl discount store was opened in 1973, copying the Aldi concept. Schwarz rigorously removed merchandise that did not sell from the shelves, and cut costs by keeping the size of the retail outlets as small as possible. By 1977, the Lidl chain comprised 33 discount stores.
Since launching in the United Kingdom in September 1994, Lidl has grown consistently, and today has over 590 stores. While it is still a small player in the United Kingdom, with a grocery market share of less than 5%, its importance, along with that of continental no-frills competitor Aldi is growing, with half of shoppers in the United Kingdom visiting Aldi or Lidl over Christmas. 
In October 2009, Lidl Movies was launched in the United Kingdom, undercutting Tesco DVD Rental, which had previously been the United Kingdom's cheapest online DVD rental service. The service was powered by OutNow DVD Rental. OutNow went into liquidation in October 2011, taking Lidl Movies with it. In August 2013, Lidl UK also launched an online photo service, which prints photos and photo gifts at discounted prices.
In January 2012, Lidl launched bakeries in their stores across Europe. They consist of a small baking area with a number of ovens, together with an area where bread and pastries, such as croissants, are displayed for sale.
Like fellow German supermarket Aldi, Lidl has a no-frills approach of displaying most of its products in their original delivery cartons, allowing the customers to take the product directly from the carton. When the carton is empty, it is simply replaced with a full one. Staffing is minimal, so that a profit can still be made even though the prices are low. Together with Aldi, Lidl has carved out its own niche with this approach. In contrast to Aldi, there are generally more branded products on offer and while Lidl imports many low-priced gourmet foods from Europe, it also sources many local products from the country where the store is located. Like Aldi, Lidl has special weekly offers, and its stock of non-food items often changes with time. Lidl operates in most European countries e.g. much of Eastern Europe, Italy, Greece, Ireland, Scandinavia and the United Kingdom. In contrast to Aldi, Lidl advertises extensively in its homeland of Germany.
Trade unions in Germany and other countries have repeatedly criticised Lidl for mistreatment of workers, breach of European directives on working time and other abuses. These have been published in the Black Book on the Schwarz Retail Company published in Germany and are now also available in English. While The Times notes that Lidl managers work excessive hours, being obliged to sign out of the Working Time Directive when starting with the company, both The Guardian and The Times in the UK amongst other allegations have reported that Lidl spies on its workforce with cameras, makes extensive notes on employee behavior, particularly focusing on attempting to sack female workers who might become pregnant and also forces staff at warehouses to do "piece-rate" work. Lidl management has denied the charges. In Italy, in 2003, a judge in Savona sentenced Lidl for anti-union policies, a crime in that country. Lidl has been criticised in the United Kingdom and Ireland for not allowing workers to join unions.
In March 2008, the German news magazine Stern released a cover story reporting systematic surveillance of Lidl workers, including the most intimate details of their private affairs.
In November 2014, Lidl UK staff were stopped from speaking any language other than English - including Welsh. The Welsh Language Society (Cymdeithas yr Iaith) said the policy was "appalling". The chairman, Jamie Bevan, added that "since the Welsh language bill was passed four years ago, it is illegal to stop staff from speaking to customers in Welsh".
Currently sourcing locations and planning head office to be set up in the Melbourne metropolitan region, as yet store numbers are unknown but Lidl is expected to mirror Aldi's rollout throughout the eastern states.