CEO Pieter Haas talks Ceconomy
Pieter Haas: "We see Amazon as a 'frenemy'"
This doesn't mean, of course, that Pieter Haas is having an easy ride. His home market is mature to saturated and he has a 800-pound gorilla in his room who answers to the name of Amazon.
So has this CEO of a still essentially bricks & mortar retailer a cogent survival plan in a digital world and a clear game plan for Europe?
The company has just announced a mixed bag of results for the business year to September 30. Net revenues are up slightly (+1.3 per cent) to €22.2bn, but this was largely due to an increase in online sales of around 40 per cent to €2.4bn.
"Lead or Leave"
I sleep just fine, thank you. Of course consumer electronics is a very important product category for Amazon, and we are competitors in that arena. But we also work together with Amazon. We sell Kindl and Alexa both in our stores and online. Amazon is therefore a "frenemy" for us, in other words, a mixture between a friend and a competitor.
But the fact remains that this giant continues to grow its market share...
True, but Amazon's growth in consumer electronics is primarily at the expense of pure players. Pure players, including Amazon, have had a more or less constant share of the market since 2011. Amazon has been taking share from them.
But our multi-channel model is increasingly a winning one. Retailing has now become a bit like dating: You get to know each other online and then meet in the real world.
Are you seriously trying to make us believe that Amazon isn't a real competitor?
Of course Amazon is a competitor, as I have just said. We try to win the same customers and build a long-term relationship with them. We are both trying to monetarize our customer community. But with two billion customer contacts a year we are an immensely competitive force – even against the likes of Amazon.
It is often said in the trade that one of the factors hindering the full-blooded implementation of a multi-channel strategy within your company is the strong autonomy you have always allowed your store managers at Media-Saturn. How true is this?
This is and always was a load of nonsense. Admittedly, it was late before we realised the potential behind digitalisation. But this wasn't because of our store managers, but because of different views on different management levels. Our store managers totally support our multi-channel strategy because they see that this is exactly what our customers want.
We are now the fourth-largest online and mobile phone retailer in Germany with more than €2bn worth of sales in this segment throughout Europe.
So, if you are growing so strongly online, you will presumably be designating an increasing amount of capex into this arena?
We invest primarily in technology, regardless of the channel, and not just online. Today's retailers need technology everywhere from category management to customer loyalty programmes, from web shops to data analytics.
Where would an outsider see physical evidence of this?
Take for instance how we set our prices. The process is completely driven by technology from the analysis of thousands of competitor prices to the electronic price tags we have on our shelves. This enables us to run a so-called dynamic pricing strategy where we can change thousands of prices in all our stores at the press of a button for, say, Red Friday.
Here, however, I would stress that this is an option only and one which we practice outside business hours, unlike gas stations who change their prices several times a day.
A Media Markt store in Würzburg/Germany
Our strategy is clear: We want to extend our position as the leading consumer electronics platform in Europe. In summer we acted on our strategy to play an active part in the consolidation of the European consumer electronics retail market and took a 24-per-cent stake in France's leading player Fnac Darty.
But one which gives you no say in its daily operations...
We are very happy with our financial investment in Fnac Darty because the company has an excellent management team.
According to what criteria were your three seats on the supervisory board of Fnac Darty given?
We complied with French corporate governance regulations and proposed independent board members. They have since been confirmed by Fnac Darty.
Your board, however, has only three men. Couldn't Ceconomy use a quota of women?
Our board is based on experience and competence not on quotas. 40 per cent of our supervisory board, by the way, is made up of women.
To what extent do your corporate statutes and your long-standing quarrel with minority shareholder Erich Kellerhals hinder you from taking stakes of more than 25 per cent in other companies?
As I have already said, we are currently very satisfied with our stake in Fnac Darty, so the question doesn't arise at the moment.
With what store formats do you want to grow your business?
We are expanding selectively today and with store formats that meet local consumer demands. Our focus is currently on new, smaller formats with sales surfaces well under 1,000m² which can also be run successfully in smaller towns or highly-attractive inner-city sites.
We are also concentrating on shop-in-shop solutions in, for instance, Metro's Russian and Belgian Cash & Carry stores as well as with Tesco in Hungary.
Does that mean you have to compromise on the range and breadth of your assortment?
No, our multi-channel approach allows us to run our full assortment wherever we are.
When did you last talk to Dixons Carphone CEO Sebastian James?
We had a chance meeting at the beginning of this year when we both happened to be on two separate investor roadshows.
Why did you take a stake in Fnac Darty rather than in Dixons? Wouldn't Dixons have suited you better?
The decision to participate in Fnac Darty had nothing at all to do with Dixons. We had a chance to buy a 24-per-cent stake and came to the conclusion, after doing due diligence, that the investment would increase shareholder value.
A Saturn facade
There is no question of that at the moment.
Are you still in contact with Dixons?
As European market leader we see it as our role to know both colleagues and competitors.
Looking to the south-east, you seem to have gone through hell in Turkey due to market developments there. Would you have ever gone there with hindsight?
We learn from mistakes on principle and aim never to repeat them. This also applies to our experience there. We now understand what we have to do in Turkey. Now that Best Buy, Euronics and Dixons have left the country, we can profit from the long-term opportunities on this dynamically growing market with its very attractive demographics and tech-oriented consumers.
How would you define your foreign expansion strategy?
In three words: "Lead or leave." We only stay in a country where we see a chance in the medium-term of becoming market leader.
Then, according to that logic, shouldn't you be leaving Russia and Sweden?
The very same logic requires that one first asks whether we can assume a leading role on these markets. In Russia we are currently cutting overheads in order to reduce our losses there. Meanwhile, we are restructuring in Sweden.
But wherever we are, we always innovate: In Russia we have shop-in-shop stores at Metro C&C, and in Sweden we are selling cars for the first time – electric ones of course.
Could you ever take a stake in a company outside of Europe? Would you be interested in, for instance, Suning, M-Video or Teknosa?
At the moment we are concentrating on those countries where we are already active.
What other international retailers could you cooperate with on a shop-in-shop basis?
We also lead the trade in this field. We are currently in 89 Russian Metro C&C stores and in six of Metro's "Makro" cash & carries in Belgium. We also run two shops in two of Tesco's hypermarkets in Hungary and are very encouraged by the results.
Tesco is continuing to look for ways to reassign sales space in its Big Box stores in the UK. Could you provide a solution?
Media-Markt and Saturn are always a good idea.
If you had to emphasise just one strategic goal, which is particularly important to your heart, what would it be?
Without a doubt it would be staff transformation and motivation. We think of ourselves today as partners who accompany our customers throughout the day and who help them navigate through their day. Our staff are the vital interface with our customers to get this message over and to make it real.
That's why I met with all of our more than 1,000 store managers only recently because I want them to ensure that their staff really understand how important it is to advise customers and to provide them with a real service. It is precisely here that we have an advantage over Pure Players, but only if we really live and practice these ideals.
Read in German: "Amazon ist für uns ein Frenemy" by Mike Dawson on pages 21 & 22 of Lebensmittel Zeitung, no. 51, 22.12.2017.