DUSSELDORF — With the 103 door Galeria Kaufhof department store chain officially under the aegis of Hudson’s Bay Co. Inc., for little more than a month, Don Watros, president of HBC International and chairman of the Galeria Kaufhof supervisory board, and Kaufhof chief executive officer Olivier Van den Bossche were the center of attention at the German Fashion Retail Congress here.
About 350 Kaufhof vendors invited to a meeting with HBC in Cologne the night before were also eager for strategic details, though the two specifics that came up – a request for a bonus to the tune of 1 percent of the retail price as well as a lengthening of the payment period to 90 days — were probably not what most had expected.
“We view our vendors as our partners, and we fully anticipate to grow this business,” Watros told the Congress audience. “We need to invest in the stores, to invest in sales people on the floor, and in marketing, all of which will benefit our vendors tremendously. We are asking them to help.”
Watros wouldn’t specify HBC’s investment budget, but when pressed if HBC was prepared to spend more than Metro’s estimated annual outlay of 100 million euros, or $107.7 million at current exchange, he responded, “we will invest significantly more. Is 200 million euros a reasonable amount? Yes, but it’s not just about money,” he stressed. “It’s the manpower, adding new brands to drive the business, (directing) management’s energy and focus, and how much we expect to achieve. We’ll have to be prudent,” he said.
For the most part, however, Watros’ tone was bullish. “We see a bright future in department stores and can grow sales, which we fully intend to do in Germany and Belgium (where Galeria operates 16 Inno stores). He noted the starting position in Germany was stronger than with HBC in Canada, where the group could grow sales 30 percent in the first five years.
“How are we going to do it?” he continued. “It’s all about brands. People come to department stores because they’re a house of brands, and we believe the core business is in cosmetics, shoes, handbags and accessories, coupled with brands in the apparel business. We will expand the brand matrix, and help access brands that were challenging to get in the past,” he commented, without naming names, and also didn’t rule out editing the existing portfolio. “Kaufhof is over-assorted,” he acknowledged, and some brands may have outlived their usefulness.
“But we are not entering the market with a recipe or a team from the U.S. and Canada,” he emphasized. “This will be a German strategy and buying will be done by a German team.”
Also on the agenda: growing sales space by repurposing non-productive space; significantly improving Galeria Kaufhof’s online presence; building up omnichannel activities, as well as enhancing the in-store experience. Though Watros said he would “love” to roll out Saks Off Fifth in Germany next year, he said it won’t be possible given the scope of work to be done with Galeria Kaufhof. Nor is there a specific time plan as yet for bringing Saks Fifth Avenue to Germany, but he said it will be “as soon as we can.”
As for Kaufhof, the market will have to wait at least until the fourth quarter of 2016 to witness the first changes, which will be tested at smaller doors in cities like Hannover, Stuttgart, Dusseldorf or Hamburg before the chain’s key flagships in Cologne, Frankfurt (Zeil) or Berlin (Alexanderplatz) are targeted. However, the moves won’t be modest. “We’re going to make statements. For it’s not just about putting in a shoe department, but a great shoe department. That we’ve learned.”
Internet and internationalization are the two of the most-used buzz words when discussing the retail sector now and where it’s headed in 10 years. Which made the Munich-based, internationally successful and, since 2014, Neiman Marcus owned luxury online business Mytheresa.com a fitting topic of congress attention. Yet given the nature of its clientele, Mytheresa.com often doesn’t give a hoot about the latest digital wisdom or trends.
“Big data? Forget it,” declared Mytheresa.com president Michael Kliger. “How do you learn about or get to know your customer? We don’t need 30 million pieces of data, plus we know many customers shop online because it’s anonymous. How to better collect data is not the intelligent question but rather what more can we give the customer.”
For Mytheresa, that’s not a journal. “Our customer is very informed, and we don’t need to tell her what the trends are. We see ourselves as retailers, not a magazine, and the most important aspect of a retailer is the edit,” he stated. “We are sharply focused on a narrow selection of brands, and with about 170 designers, we are in a way the most exclusive.” What product looks good next to which are the decision of a team, not algorithms, “and customers welcome that.”
While Mytheresa is on Instagram and Facebook, “WhatsApp and smartphones are the most important for our customer,” Kliger said. “The smartphone is the future, because it’s not technology. It’s always there, and I always say it’s probably more stroked and talked to than people’s partners. ”
Though the German retail scene is undoubtedly in the midst of deep-seated structural changes, those shifts aren’t necessarily as drastic or as fast-paced as many had expected, other analysts and retailers at the congress said.
Under the title “Agenda 2016,” the annual industry event, organized by the Association of German Apparel Retailers and trade journal TextilWirtschaft, nonetheless strove to envisage the state of the market in 2025, or 10 years’ time.
For the scenario analysis “Fashion 2025,” KPMG, the German tax, auditing and consulting company, tapped 100 retailers and 11 industry experts, who concluded that brick-and-mortar and multilabel shops are far from being a thing of the past. While market share is still being redistributed among the existing retail sales channels, with small independent stores losing most ground as online and vertical retailers make further gains, experts predicted 10 years from now, “the store will still be key.” That said, it is expected about 2,500 stores, or 4 percent of Germany’s retail doors, will close over the next decade.
All three formats — pure online, cross-channel and stationary retail — will continue to exist in 2025, but multichannel and cross-channel will take precedence over pure online players. Seventy-five percent of the study participants predicted cross-channel will be part of the normal offering in 2025. Being present online is critical for visibility and networking, but 60 percent of the retailers said an online shop, per se, isn’t necessary. As for smaller players, shared economies via joint Web shops could be options.
Verticalization will continue apace, according to the study, with new international players and more differentiated concepts entering the scene in the years to come, but multilabel formats also have good potential, via innovative concepts.