Albert Heijn opens German convenience store
The Dutch retail giant has chosen Aix-la-Chapelle (Aachen), close to the German border, for its first point of call. A second shop is to follow in Essen later this year.
The 80m² outlet in Aix-la-Chapelle is sited on a busy pedestrian street (Peterstraße 48). It will offer around 600 convenience lines, including coffee, tea and cocoa, water, soft drinks, salads, ready meals, snacks, tapas and sandwiches.
An invitation to interview Albert Voogd, European VP New Markets, and Jürgen Hotz, General Manager Albert Heijn Germany, at Ahold's new German office in Mettmann has one reaching for the thermometer, however.
Given the saturated, extremely price-conscious and competitive nature of the German market, one could be forgiven for expecting signs of delirium.
After all, the country has been the grave of at least a dozen top international retailers over the last two decades.
Both gentlemen, however, appeared remarkably sane and didn't have the look of volunteers for Mission Impossible.
At least they know their company has both size and international experience on its side. Last year, Ahold posted revenues of €30bn and net income of more than €1bn in the US and ten European countries.
Still, the surprise announcement gives rise to a number of questions: Why does a major retailer enter the badlands when there is so much growth to be had elsewhere in the world?
Why does a traditional supermarket and superstore operator try to internationalise with convenience shops when it only has 53 of them at home? Could it be that "Albert Heijn to go" is just a bridgehead and eyeing a German supermarket operator like Kaiser's Tenglemann?
Gentlemen, why are you expanding abroad with 'Albert Heijn to go' in Germany of all places? Surely it’s one of the hardest retail markets in the world?
Jürgen Hotz: We're well-prepared. Ahold looked at the German market for a long time and researched it thoroughly. We have developed a convenience concept which can be exported to numerous countries, but we see particularly large potential in Germany.
Aren’t you afraid of Germany’s hard discounters?
Voogd: Convenience is a real trend. Demographic structures are changing, and consumers have less and less time. 'Albert Heijn to go' caters for these changes in a way no one else does. We now have more than ten years’ experience in the convenience trade.
Why didn’t you come to Germany sooner then?
Voogd: At first, the convenience segment only began to develop very slowly, but it has now gained tremendously in pace. When we began to research Germany two years ago, we were dead-on as regards timing.
Lots of first-class international retailers, including Walmart, Marks & Spencer and, most recently, Delhaize, have tried and failed in Germany. Why do you think that you won’t meet the same fate?
Voogd: It’s certainly hard trying to enter Germany with larger store concepts which are already well-established locally. Our convenience store concept, however, has not been seen in Germany to date. So, unlike the retailers you mentioned, we are bringing something new to the market.
But isn’t Germany very different from the Netherlands?
Voogd: It’s misleading to compare national markets as a whole. Our concept satisfies the specific convenience requirements of an international customer segment. Of course there are plenty of discount fans in Germany, but our German customers will be as time-stressed as those in Holland or anywhere else in Europe.
To what extent did you have to adapt your concept to the German market?
Voogd: Ahold hired German category managers to make the necessary adaptations in terms of assortment. Currently, we are right at the beginning of a learning curve. Don’t worry, however, we will also offer German beer!
In addition to gastronomic chains, there are more bakers and butchers in Germany who also dabble in convenience. How is Albert Heijn adapting to this additional competition?
Hotz: Of course, there are great bakeries, but we offer something completely new. We are coming to the German market with a multi-category approach which includes fresh and healthy foods. No one has consistently tried to do this in Germany yet.
Voogd: We also offer time-stressed consumers an extremely quick shopping experience in a friendly store environment with lots of service.
How quick is quick?
Voogd: On average, our customers are only two minutes in the store. Very few of them want to eat something on the premises.
That’s not surprising, given the fact that you offer no seating…
Voogd: Our concept caters to a specific clientele who are constantly on the go. Those customers who are looking for a place to relax need to go elsewhere.
So your concept doesn't cater for the needs of the growing number of older people?
Hotz: Why do you say that? We have a lot of older people in some of our Dutch stores. This will also be the case in Germany. Every location has a different customer structure. There are some outlets where there are mainly school children mid-morning. There are others where the working population predominates.
If your customers are fast-in and fast-out, they won't have much eye contact with your merchandise. How do you get the sales?
Voogd: Success doesn’t only depend on the number of lines we have in our assortment, but also particularly on customer frequency. Some customers, such as office workers, shop in our stores twice a day.
Doesn’t the fast processing of customers require a lot of staff?
Hotz: Yes, we work on the basis of six to seven employees per shift.
Voogd: We don’t scrimp on personnel costs. Friendly service is one of our most important assets.
So where do you make your margin — higher prices?
Hotz: No, our coffee starts, for example at one euro a cup. We sell our salads as from €2.50. These are all good, round prices in terms of coinage which help to speed transactions up at the till.
How on earth does this all add up in terms of profitability?
Voogd: The key to success is customer frequency, and you only get this in A1 locations.
But high-frequency locations are expensive and very hard to come by…
Voogd: True, but Ahold has 125 years experience in retailing.
What sites have you found so far?
Hotz: Our second branch will be opened near Limbecker Platz in Essen. In a first wave, we shall open ten sites in cities with more than 150,000 inhabitants in the German federal state of North Rhine-Westphalia. We have already signed several contracts.
Would you also consider smaller cities?
Hotz: Not really because we need cities with high customer frequencies. If, however, we were to find a really good location in a town with only 100,000 inhabitants, which also merged on a big city, then we would certainly consider it.
You said you wanted to start with ten outlets. Is that realistic?
Hotz: It all depends on planning permission and how long it takes to convert the sites. However, we are very ambitious, and there are many places where we can grow. Currently we are focussing on shopping streets, stations, airports, bus stops and bus depots.
Which is precisely where a lot of other retailers want to go…
Voogd: Yes, but many competitors aren’t looking for the same type of sites. A sales surface of only around 90 to 120m² is ideal for our assortment.
Will you also expand via franchise in Germany as you have partially done in the Netherlands?
Voogd: Initially we shall expand as a multiple in Germany, but franchise could be an option. After all, it has worked very well in the Netherlands.
Has the Dutch market become too small for you?
Voogd: Not as far as convenience is concerned. 'Albert Heijn to go' will continue to expand in the Netherlands. We want to open a further 150 additional sites in Europe by 2016.
Will 'Albert Heijn to go' enter further new countries in Europe?
Voogd: Nothing is planned at the moment. However, when one has a concept which provides a real category solution, then it could be rolled out in almost every larger European city. That said, we want to concentrate on North Rhine-Westphalia for the time being.
Why North Rhine-Westphalia?
Hotz: This German federal state is nearest to the Netherlands, which is particularly important when it comes to delivering fresh produce and products with a very short sell-by date. North Rhine-Westphalia is also roughly the same size as the Netherlands and has the same population density.
Are convenience shops a bridgehead for Ahold to expand into Germany with supermarkets?
Hotz: We are interested in convenience — full stop. We don’t want to run bigger stores in Germany. In Aix-la-Chapelle, for instance, we moved into a former Schlecker drugstore where we could have utilised a larger sales surface, but we reduced it to a more optimal size of around 80m².