German retail CEOs talk the trade

At the beginning of each year, our newspaper feels the pulse of the trade by asking the great and the good of German retailing how they view the status quo. Although we are honoured to receive their replies, one cannot quite suppress a certain feeling of amusement on reading them.

Could these politically correct lines, airbrushed with inordinate care by a bevy of overpaid press and legal officers, really come from the same men (where for God's sake are the ladies?) who regularly reveal a wicked sense of humour at the bar of Goldener Zuckerhut, our annual trade shindig in Berlin?

But let us not be churlish, there are obviously many good reasons why all concerned have to mind their P's and Q's. Just think of Edeka CEO Markus Mosa. He still lives in the hope that Vice Chancellor Sigmar Gabriel will grant Germany's largest food retailer ministerial approval to buy regional chain Kaiser's Tengelmann against the advice of his own sharp-fanged cartel authorities. Poor man, he must first wait until Gabriel has returned from a sunshine trip to Cuba.

If, therefore, readers are looking for delightfully indiscreet confessions and detailed declarations of intent, they must click away now. But for all the inordinate care taken to whiten public teeth and burnish corporate cufflinks, the statements of our retail bosses contain enough substance to reveal what is keeping them awake at night.

Everyone keen on 2016

First the good news, all the retail heavyweights are starting the year in confident mood with market research company GfK predicting an increase in German consumer spending power of between 1.3 and 2.2 per cent. "Consumption was positive in 2015 and we believe this will continue as the unemployment rate falls further," says Metro Group CFO Mark Freser.

Otto Group boss Hans-Otto Schrader is even more optimistic, given currently low interest rates, and sees double-digit growth in e-commerce. Leading discounters Aldi and Lidl also expect sustained economic growth to support demand.

Discounters spoil the party

No one, however, believes the cut-throat competition will ease. "Prices and sites will remain major battlegrounds, which is why we are ramping up store openings," says Tegut CEO Thomas Gutberlet with an unmistakable tone of defiance.

The retail elite are unanimous in their view that Aldi's decision to list more brands has pushed the temperature of Germany's historically hot price climate even higher. "It's a reality we will all have to continue to face," admits Globus CEO Thomas Bruch. Gert Schambach, executive partner at Dohle Group, calls the "aggressive sale of brands" by discounters "at killer prices" his biggest challenge.

They have also been upgrading their stores, which doesn't seem to worry Edeka. "It simply shows the strength of our successful (supermarket) concept, when they try to copy us," jibes CEO Markus Mosa.

Meanwhile, drugstore and pet shop operators are confident that they can keep out of the fray. "Discounters already stock the most important brands. Any further listings will mainly increase competition among themselves," hopes Fressnapf owner Torsten Toeller. This doesn't seem to worry Germany's fifth-largest discounter, Norma, however. "We don't fear more competition because we attained all our goals for 2015," says CEO Gerd Köber.

Foreign danger zones

Most of Germany's big international retailers are more cautious when it comes to business beyond national borders, especially as regards Russia and the Ukraine. Perhaps this is not surprising, given how major international retail giants Ahold, Carrefour and Tesco have burnt their fingers overseas.

Nearly all of Germany's leading retailers, however, see no reason to halt growth abroad, particularly when they have a strong base at home. Only Torsten Toeller was prepared to admit that Fressnapf had put expansion on hold in Hungary due to increased political risk.

Cash & Carry king Metro Group, which has just sold its operations in Vietnam and whose Russian business has been adversely affected by the fall in the rouble, doesn't see any major growth in the world economy this year.

Others are worried about sudden spikes in raw materials prices. Götz Rehn, CEO of organic retailer Alnatura, fears the "very tangible effects of climate change and harvest failure".

The ECB and a weaker euro

Few look favourably on European Central Bank president Mario Draghi and his easy money policy. "Historically, increases in the money supply have never stabilised a currency," warns Dirk Roßmann, owner of drugstore chain Rossmann.

As the exchange rate of the dollar and Swiss franc continues to increase against the euro, import prices remain on the up. "A stronger dollar also affects imports from the Far East," says Torsten Toeller.

Thomas Gutberlet at Swiss-owned Tegut, clearly agrees: "A weaker euro makes imported goods more expensive for German customers and erodes retailer margins."

Erich Harsch, CEO of leading drugstore chain dm, begs to differ, however: "The euro is better than its image because Europe is better than many comparable states."

Dumb politicians & smart SMEs

All retailers seem unhappy with government taxation and what they regard as overregulation. However, they do see numerous future benefits from the mass influx of refugees and migrants from the East.

Metro Group CFO Mark Frese feels that the contribution of retailers to the national economy is not sufficiently appreciated, given that they employ 4.8m people and account for €530bn in annual revenues.

Dirk Roßmann clearly doubts the whole political class: "Many German MPs – from all parties – lack deeper insight into economic, financial and fiscal matters." In his opinion, this explains, for instance, their total lack of comprehension when it comes to inheritance tax.

Predictably, SMEs (small and medium-sized enterprises) feel the government could do a lot more for SMEs. "Government policies are often directed against small and medium-sized enterprises," Thomas Gutberlet believes. The Tegut CEO finds this particularly astonishing when SMEs pay the most taxes and employ the most people.

Particular bugbears seem to be increasing energy taxation, where retailers feel at a disadvantage to manufacturers, and plans to increase the minimum wage.

All this is as shocking as it is sad. Retailers will now have to turn the lights off more frequently, and their millionaire CEOs and billionaire owners will have to pay their staff more. Sigh!

(photo: Gerhard Seybert-Fotolia)

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