February 3, 2017
Metro Group: Run by a succession of portfolio managers masquerading as retailers
Next Monday the long-suffering shareholders of Metro Group will be asked to rubber-stamp management plans to split the German retail giant into two separate public limited companies. Weird-sounding "Ceconomy AG" will then soon house Europe's largest entertainment electronics retailer, Media-Saturn, while niftily-named "Metro Wholesale and Food Specialist Company" will combine Europe's leading wholesaler, Metro Cash & Carry, and "real,-", Germany’s largest Big Box retailer by sales. If one harkens to the siren song of Metro Group CEO Olaf Koch, international investors will soon be able to participate in an exciting international growth story: "We are now bringing two strong, successful and strategically-focused companies to the start(ing block)." Is this really the case, or is the financial community being sold another round of snake oil?
January 12, 2017
Goodwill: Now you see it, now you don't
Chief Executive Officer Olaf Koch likes to joke about his surname when discussing plans to split German retail giant Metro Group into two separate entities by mid-2017. Koch means 'cook' in German, so the pleasantry is moderately witty in his home country, however fatal it would be in English-speaking business circles. So, all things considered, perhaps 'magician' would be the better word to use. After all, a man who can make nearly €580m in goodwill disappear off a corporate balance sheet in a perfectly legal way is little less than a financial wizard.
January 7, 2017
Lidl's Czech model: "Black as my own face" (Othello) (photo: screenshot Lidl website)
Over the last seven years, this satirical column has been particularly critical of Lidl and its parent company Schwarz Group. Along with some trade unionists and NGOs, German Retail Blog has often questioned the ethics of this low-profile German discount giant. The company has been termed "ruthless", "hard-nosed" or "redneck" and its management "macho". Doubt has also been cast on an internal decision to burnish corporate morals. Even a recent move by the c-suite towards a less formal management culture has been teased without mercy. But an apology is now called for: Lidl has proved that a leopard can change its spots. How did this conversion of Saul to Paul on the journalist road to Damascus come about? A threat of legal action? A chummy lunch with the publisher? The promise of a job in the press department? No, Lidl has revealed its moral integrity through the eloquence of action.
January 6, 2017
Ready for the challenge?
Flood the moat, raise the drawbridge, lower the portcullis! The robber barons of German retailing are making ready to protect their lands and traditional fiefdoms from the relentless advance of a foreign army carrying the banners of 'Prime Now' and 'Amazon Fresh'. For years German retailers have tried to withstand the strong arm of progress. Customers with credit cards were turned away at the tills; private equity was met with vinculated shares; and CEOs continued to exercise feudal rights over their serfs. But these bastions have slowly crumbled. To date they have at least been successful in keeping online food delivery to a mere 1 per cent of the trade. So will their castles be able to withstand the coming siege? Admittedly, these knights in shining armour are brave and ready to die for the cause of bricks & mortar, but will this help them when the invader has gunpowder?
December 27, 2016
The mother of all soothsayers is regrettably no longer available to advise traders on the marketplace
In ancient times when the priestess Pythia presided over the Oracle of Apollo at Delphi, interpreting the future was big business. Little has changed since then; we just call our soothsayers consultants. Then, as now, we urgently need to demythologise the often sibylline answers today's highly-paid experts give to the overhyped mystery of things to come. The best way to predict the future is, of course, to make it yourself. The next best thing is to interpret what the movers and shakers are doing as the minnows will usually follow the Tritons. In retrospect, the future may have looked unfathomable to most contemporaries, but often turns out to be little more than a continuation of existing trends that should have been glaringly obvious to all concerned at the time. So perhaps we should look at what is in order to know what will be. But do the trade gurus we have asked to ponder the future agree?
December 22, 2016
Santa goes cyber (caricature: Oliver Sebel)
In case you hadn't noticed, it's nearly Christmas and surely a time to be a little less formal. One of the pleasures of being a journalist is the broad variety of people you get to meet. These range from bolshie trade unionists, blowing whistles and ranting about the evils of private equity, to sleek, narcissistic CEOs. Fortunately, there are positive exceptions in both categories. One also has one's colleagues, who, as with most publications, include a remarkable number of eccentrics. Then there are some infectiously enthusiastic stringers, like Werner Prill and Christian Lattmann, who have just returned from whistle-stop store tours in New York City viz. Europe. Both were astonished that we wanted to put their photos online as neither of them claims to be a professional photographer, but in our opinion the odd shaky or underdeveloped picture makes for authenticity. Want to have a peek?
December 20, 2016
Ever young, beautiful and with a smartphone: Frame from the promotional video of Amazon go (artwork: Gudrun Kiender)
At first blush it looks like progress. Next month Amazon will go public with a pilot convenience shop that has no checkout lines or cashiers. The beta model for the new "Amazon go" store is currently being tested by company employees in hometown Seattle. A corporate video explains the concept: Sensors and articifial intelligence detect what shoppers take from the shelves and add each item to a virtual cart. The price of the goods is then debited from their smartphone when they leave the store. If the "Just Walk Out" technology is implemented by Amazon for bricks & mortar retailers or is copied by them, checkout-free stores will obviously have a positive impact on their P&L. Like most employers, retailers, whatever their highly paid CEOs may say to the contrary in public, generally see their staff as a cost rather than as an asset. So they are likely to embrace the new idea with open arms. But it is surely also a tacit admission of failure.
November 29, 2016
Help from big data: Otto delivers more products to online customers in two days (photo: Lebensmittel Zeitung)
Thanks to technology, retail distribution is getting faster and faster. Ecommerce retailer Otto Group provides a good example. The Hamburg-based company is now using Blue Yonder software to deliver brand products to customers faster than ever before. This means that even items not stocked in large quantities at corporate warehouses can still reach the customer within two days. Otto is expanding the implementation of Blue Yonder's predictive applications to an increasing number of business processes. The retailer has already employed artificial intelligence by Blue Yonder for a number of years for the optimization of purchasing and stock storage processes as well for 'dynamic pricing'. But now Otto is using Blue Yonder as an intelligent order solution for products with high stock turns where the multichannel retailer would normally only contact the manufacturer after customers purchase online.
November 18, 2016
Eagle has landed (photo: passengerz/Fotolia)
It's certainly counter-intuitive. Amazon has become big and brawny through being mean and lean. While traditional bricks & mortar retailers remain encumbered with their physical store bases, the US online giant has soared through cyber space like an eagle. So why is Amazon Fresh going offline in Seattle and experimenting with a drive-in? Could the tech star be on the verge of clipping its prime competitive advantage? Or is the project just another laudable example of the way US companies fearlessly progress by trial & error? Meanwhile, retailers can only hope Amazon doesn't conclude that they charge far too much for their often grim customer service and depressing store ambience. As there is no point in asking the secretive and opaque behemoth for more information about its ultimate intentions, let's take a sneak peek at what exactly the company is building in its home town.
November 11, 2016
French connection: Michel-Édouard Leclerc and Rewe boss Alain Caparros like shopping together in Brussels (photo: Anna-Maria Romanelli)
It was only a little letter from a small office in Brussels, but it has sent a big shockwave through the industry that could revolutionise the way retail groups do business with their major suppliers. The sender, Eurelec Trading Scrl, opened for business in June as a cooperative joint-venture between Rewe und Leclerc. Its function as a European buying office is to obtain the best possible terms & conditions for these German viz. French retail giants. Logically, Eurelec has started its annual negotiations for 2017 with the big boys. We understand that there were originally six international brand manufacturers involved, but now only four: Mars, Mondelez, PepsiCo and SCA. Apparently, they have been asked to come to a decision by the end of this month, and it is generally believed that they will accept. Eurelec seems to have detailed knowledge of the terms & conditions these suppliers accord retailers on both sides of the Rhine. So has there been collusion between Rewe and Leclerc in contravention of EU cartel law?