January 31, 2013

Online retailer Zalando scares toys trade

Zalando warehouse in Erfurt (photo: Goodman)
Business in a box: Controversial shoe & fashion online retailer Zalando has caused a stir at this year's International Toy Fair
Rumours have surfaced at this year’s International Toy Fair in Nuremberg that Zalando wants to muscle into the toys business.

It is alleged that the German shoe and fashion online retailer has already contacted leading toy brands and could be using the "Spielwarenmesse" venue, beginning today, for further discussions with suppliers.

The "shoe-ting" star strongly denies the story, so why is everyone getting so hot under the collar?

Eberhard Fuchs, the strident owner of specialist retailer Rofu, claims in an open letter that Zalando is recruiting staff for the autumn and Christmas seasons “in order to cater for its new toys assortment”.

He also calls on the trade for a show of solidarity against the increasing encroachments of online operators who offer rock-bottom prices allegedly with virtually no margin merely in order to gain market share.

Fuchs appeals to suppliers asking them the rhetorical question: Where they believe they will be able to display their products when no specialist retailers are left?

Strenuous denial

All this is denied by Zalando, which has only dabbled in toys so far with doll brands Käthe Kruse and Sterntaler. “There will be no major offensive in toys over Christmas,” says a company speaker who condemns “unnecessary scaremongering”.

Zalando states that talks with suppliers at the world’s largest trade fair for toys and games merely concerned occasional special items and short “flash” assortments “which don’t rob revenues from retailers”.

However, the dementi hasn’t reduced temperatures or blood pressures. Irrespective of where the truth lies, Zalando continues to polarise the trade. Clearly, most believe that the online giant could successfully diversify into toys, should it wish to do so.

It is equally evident that specialist toy retailers are really worried by the rapid growth of the internet in their segment. Although total German toy sales increased 3 per cent last year to €2.7bn, a quarter was online. This represents a hefty jump of five percentage points from 2011.

The thorn of Müller

Traditional toy retailers are worst hit as they have also been feeling the heat from big multiples such as Toys R Us, and Metro Group hypermarket subsidiary “real,-“.

The worst thorn in their flesh is drug store operator Müller whose big toy offer has stolen up to 30 per cent of local specialist retailer business.

The Ulm-based company has profited from its modern store ambience, clearly structured assortment, and excellent availability. Müller has also successfully meshed its bricks & mortar operations with an attractive online service.

German toy specialists have long essentially been relatively small, family-owned operations. The need to enlarge stores and create multi-channel concepts on a market with sagging margins has caused severe financial strain.

Inevitably, this will lead to further concentration in the segment, regardless of the current hullabaloo about Zalando.

 
Related article in German: Lebensmittel Zeitung, no. 5, 01.02.2013, by Tassilo Zimmermann

 

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