February 24, 2012

German retailers stay in Greece

Lidl Greece advertising
Solid as Mount Atlas: Lidl's 220 Greek discount outlets beat the company's average store revenues in Germany
Like Spartan warriors on the narrow coastal pass of Thermopylae, Lidl, Metro and Praktiker refuse to abandon their posts as Greece fights again for its very existence.

Despite a seemingly endless saga of economic woe, and much-publicised anti-German feeling, all three retailers confirmed that they have no plans to exit the country in its hour of need.

During the current crisis, food retail sales in Greece have probably declined by an average of more than 20 per cent, and non-food lines such as shoes or household goods only byslightly less. German retailers have been not been affected quite so severely, but will clearly have taken a painful hit on their 2011 revenues.

Although labour costs will presumably have fallen, this is a brave decision in view of the unforgiving terrain. In addition to excessive bureaucracy and rampant corruption, there has also been vandalism to stores, and considerable disruption to deliveries has caused frequent out-of-stocks.

Bus rides to Bulgaria

Meanwhile, a considerable number of Greek consumers try to buy staples and every-day household goods in countries outside the euro zone. Particularly on Sunday, they journey by coach and bus to Macedonia or former Yugoslavia, and even take the ferry to Turkey. One reader writes of how the poor devils try to keep their spirits up by singing "sentimental songs about the good old days" on the way.

Their main goal is, however, southern Bulgaria which is relatively easy to reach from, for instance, Thessaloniki, Greece's second-largest city in the north of the Hellenic peninsular.

Traders and retailers in Bulgaria accept payment from cross-border shoppers in both the national currency (lev) and in euros. One of the companies to profit from this development is Rewe Group's discount subsidiary "Penny" in Bulgaria.

Lidl's Greek Eldorado

Meanwhile back in Greece, Schwarz Group discount arm Lidl runs around 220 outlets which made 2010 revenues of around €1.6bn ($2.1bn). Although sales last year are said to have declined by at least 10 per cent, Lidl has a solid reason to stay.

The canny Swabians know that, with annual sales per outlet of around €7m ($9.4m), Greek turnover far exceeds the €5m (€6.7m), or so, they achieve at home on their overstored and extremely competitive market.

Tough times for Metro

By contrast, Metro Group entertainment electronics subsidiary "Media-Markt", whose 13 branches recorded net revenues of €240m ($322m) in 2010, has been hit much harder last year. "Most of the lines they offer have now become luxury goods for most Greek consumers," says one local retail expert.

Media-Markt's balance sheet for Greece in 2009 was deeply in the red, which partially explains why the Ingolstadt-based company withdrew its sister banner "Saturn" from the market in 2010.

However, a spokesperson confirmed that Media-Markt intends to stay. Also, parent company Metro Group in Düsseldorf denies rumours that it wants to close five of its nine "Makro" cash & carry outlets.

Defiant Praktiker

This defiant spirit was echoed by DIY chain Praktiker, despite revenue and earnings problems in Germany. Apparently, the Kirkel-based multiple still makes a profit in Greece, where the company attains more than a quarter of its foreign revenues (€900m; $1.2bn).

However, it is not known whether Praktiker intends to stick with past plans to grow its current network of 109 foreign stores to at least 140 outlets by 2014. Most of this expansion was originally earmarked for Greece.

Why are these guys staying, and was Aldi wrong to quit the country in 2010 (cf. separate blogs: 1 & 2)? Clearly, Greece has been a profitable foreign market for German retailers in the past, and they believe that it will be so again at some time in the future.

Unlike politicians and bankers, retailers can count. If those who know how to do their sums still believe in Greece, then there has never been a more hopeful sign for this troubled and tormented country. Stand by your pikes, O Spartans!

 
Related article in German: Lebensmittel Zeitung, no. 8, 24.02.2012, by Mathias Vogel & Hans-Jürgen Schulz



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