July 9, 2014

Karstadt merry-go-round keeps on turning

Eva-Lotta Sjöstdet (photo: Karstadt)
Couldn't get the man in the background to define his colours: Eva-Lotta Sjöstedt
Now that didn't last long, did it? Eva-Lotta Sjöstedt's brief, but heart-warming guest appearance as chief executive of troubled German department store chain Karstadt has come to a dramatic end. After only five months, the likeable Swedish lady has thrown in the towel. The announcement of her sudden departure on Monday came with bitter recriminations against principal owner Nicolas Berggruen. The former IKEA executive had always looked a somewhat naive figure in a trade dominated by ruthless middle-aged men. She tried to give a human touch to the thankless task of reviving the ailing fortunes of the high street retailer. Whereas previous top management seemed remote and aloof members of the international jet set, Sjöstedt demonstratively manned the tills and tried to relate to Karstadt's long-suffering staff. Sjöstedt's brief tenure at the helm is now over. The bitterness in her departing letter is palpable, and the wording is damning.
June 27, 2014

Foreign retailers rediscover Germany

A merry scene from Munich (photo: Romadboed Flickr)
Back to Germany: A new taste for things German
The return of British DIY retailer Kingfisher to Germany could be part of a new wave of international investor interest currently sweeping this country. Japanese convenience store operator 7-Eleven admits that it is sounding the market again. And a press office denial that London department store group Marks & Spencer will return to Germany after a recent comeback in France and the Low Countries did not sound particularly convincing. Only a few months ago, Dutch grocer Ahold reiterated its commitment to the German market following the opening of its first "AH to go" convenience outlet in North-Rhine Westphalia in September 2012. Meanwhile, Swiss giants Migros and Coop Schweiz continue to invest substantial sums in their relatively new German operations. This is all the more surprising when one remembers that a dozen or so top global retailers have burned their fingers badly here since the 1970s. So why this new interest?
June 25, 2014

Kingfisher re-enters German DIY market

Screwfix in the UK (photo: Kingfisher)
Tool of conquest: A customer places an order in a Screwfix catalogue showroom
Despite extravagant attempts at secrecy, Kingfisher looks on the verge of opening its first "Screwfix" store in Offenbach, near Frankfurt. Europe's largest DIY retailer with annual revenues of around €13bn could re-open for business in Germany as early as next month. CEO Ian Cheshire announced last October plans to open three other test outlets here, including Dreieich, on the perimeter of Frankfurt, and the Hessian town of Darmstadt. Screwfix is thriving in its British homeland and pushed revenues by 17 per cent to €827m last year. This has clearly motivated Cheshire to make the banner his spearhead: "We have 350 outlets in the UK which is less than half the size of Germany, so we see a big potential market." But former management at the London-based Plc failed to make the "Castorama" Big Box concept work in the Federal Republic between 1998 and 2003. Also a stake in local DIY player Hornbach, sold in March this year, always looked incongruous, given the fiercely independent nature of the family owners. So will the Brits be successful this time?
June 23, 2014

Talk with The Consumer Goods Forum

Peter Freedman, MD, The Consumer Goods Forum (photo: The Consumer Goods Forum)
Peter Freedman: "Consumer trust is in danger"
This year's Global Summit of The Consumer Goods Forum in Paris has again focussed attention on the world's largest retailer and consumer goods organisation. The parity-based industry network brings together the CEOs and senior management of some 400 retailers, manufacturers, service providers and other stakeholders across 70 countries. Its new Managing Director, Peter Freedman, has a tough task ahead. Nearly everyone in the trade can see the benefits of joining a global network and community. But the fierce competition among retailers and their generally tough negotiating practices with suppliers make true co-operation within the industry about as easy as a climb up the north face of the Eiger. Freedman's leadership of the organisation once known as CIES also comes at a time when digitally savvy consumers are calling retailers and suppliers into question more radically than ever before. So what does the new kid on the block propose to do about it?
June 20, 2014

GlaxoSmithKline's Shopper Science Lab

A local test shopper at GSK's Shopper Science Lab in London (photo: Sarel Jansen)
Clear view: Mobile eye tracking technology reveals what a customer really sees
Once you pass the high-security doors, having solemnly promised not to take photos, it looks like something straight out of Star Trek. But despite the hush-hush, GlaxoSmithKline (GSK) is clearly immensely proud of its new Shopper Science Lab. The high-tech facility stands only 300 yards away from the global healthcare group’s headquarters in Brentford/West London. The Brits state that they have invested "a significant amount" in the new research complex and that Metro C&C and European buying alliance EMD already number among its 35 retail customer users. Given that GSK (think Sensodyne toothpaste or Dr. Best toothbrushes) spends £3.4bn (€4.2bn) annually on R&D in vaccines, medicines and consumer healthcare products, "significant" will not mean peanuts. Like Diageo’s Customer Collaboration Centre, only a few miles down the road, this is a world-class shopper insight facility waiting to be discovered. In fact, the Shopper Science Lab is the largest of its kind in Europe and makes science look like an art.
May 23, 2014

Otto Group invests in clicks & bricks

Hans-Otto Schrader, CEO Otto Group (photo: Otto Group)
Hans-Otto Schrader: "The future of retailing is neither purely physical nor purely online, but omni-channel"
Almost like a profession of faith to an old religion in an ever more cyber world, German retailer Otto Group intends to open more stores on both sides of the Atlantic. This is an unusual step when competition from the internet is forcing many retailers to prune their store base and to reduce or reassign sales space. "Physical stores are most certainly not dead," CEO Hans-Otto Schrader proclaims. All too often such statements represent little more than the attempt to make the best out of a bad job: A traditional retailer is saddled with 20 to 30-year rent contracts and/or has invested huge sums in bricks & mortar, so management sing an appropriate song. Although Otto Group runs around 400 stores under various banners and numerous shop-in-shops, they only account for 11 to 12 per cent of net revenues (€12bn). Online makes up nearly two-thirds of the business which also gets the lion's share of the capex (more than €300m for 2013 to 2015). So why does Schrader say that it is "essential to fly the flag and open more stores"?
May 16, 2014

Shopping centres react to online challenge

Mfi shopping centre, in the Leipziger Höfen am Brühl (photo: Mfi)
Digitalisation: Mfi is offering customers more high-tech services in its shopping centres
If you build a big shopping centre of 20,000m² to 50,000² in Germany, it can cost you or your investors anywhere between €150m and €300m. Now that’s a lot of dough. Once upon a time, before the age of the internet, there was a rule of thumb in the business: "Entertainment electronics retailer Media-Markt plus two other anchor tenants and investors will queue at your door!" Those halcyon days, however, are fading fast, and for how long will today's consumers want to buy their TVs, washing machines or laptops in a shop? Shopping centre operators such as Mfi are therefore revising their strategies in order to maintain customer frequency. They don’t really have a choice; otherwise their temples of consumption will turn into retail deserts.
May 15, 2014

German retailers and the minimum wage

photo: SIG
What price the sweat of their brow?
"Sixteen tons and what do you get…?" Well at least as from January 2015 in Germany it will be a legal minimum wage of €8.50 an hour. The new legislation being pushed through rapidly by Minister of Labour & Affairs Andrea Nahles will affect retailers particularly heavily. Many small- and medium-sized food manufacturers will also have to redo their sums. More than 700,000 people currently earn less than €8.50 an hour in retailing, which hardly gives the trade a modern, attractive image. The impending legislation is also affecting the extent to which retailers use so-called "mini-jobbers". Does this make them good guys or bad guys?
May 7, 2014

German retailers won't kick in Brazil

Brazil in football fever (photo: Jose Roitberg_Flickr.com)
Everyone wants to go there: But not quite
As international football fans wait at fever pitch for the World Cup to start on June 12, German retailers aren't keen on going to Brazil any time soon. They seem quite content to reap the extra business generated by special offers and promos in their stores. Don't they like samba, sun and beautiful girls? It can't be the distance, otherwise Aldi wouldn't be in Australia; nor the language, else Lidl and Aldi wouldn't be in Portugal. Too small a market or lack of business potential? With a young population of 200m aspiring consumers and a growth curve which could make this vast country the world's fifth-largest economy next year, Brazil is Latin America’s powerhouse. So what's stopping this bunch of otherwise very cosmopolitan retailers playing an away game there when it has long been home ground for their suppliers?
May 6, 2014

New iTunes channel for our blog podcast

Microphone photo: Gerhard Seybert - Fotolia
German Retail Blog: Now with a refreshed podcast on iTunes
German Retail Blog would like to inform subscribers that we have a new iTunes channel for our podcast. iTunes users who like to hear what they read or to listen without reading only need to click the link "visit German Retail Blog Podcast on iTunes" which can be activated on pressing "Read more" below. Readers may have noticed that this site now has a fresher format after we were obliged to transfer it to a more secure server. These improvements mean that those wishing to continue listening to our audio files via iTunes are asked to change their subscription to the channel deeplinked in this text. Alternatively, you can click the icon in the info box "STAY INFORMED" on the site (cf. web page column at the top on the right). German Retail Blog offers a free audio version to all posts except where they contain interviews. Interested users can obviously continue to click the podcast at the end of each article should they prefer not to use iTunes. The audio version personalises the texts and adds a human dimension to our media product. Thank you for reading, or should we say listening?