THE STORE SOLUTION: TIME, SPACE, QUALITY
DEPARTMENT STORES AROUND THE WORLD FACE UNPRECEDENTED COMPETITION, FROM DISCOUNTERS IN THEIR OWN BACKYARDS TO TRADITIONAL STORES AND E-TAILERS ALL OVER THE PLANET VIA THE INTERNET. AND WHILE SOME DOOMSAYERS HAVE BEEN HERALDING THE EXTINCTION OF WHAT ARE OFTEN TERMED RETAIL DINOSAURS, DEPARTMENT STORES AREN’T GOING DOWN WITHOUT A BATTLE. HERE’S WHAT SOME STORES IN EUROPE ARE DOING TO FIGHT BACK.

Byline: Melissa Drier

BIGGER AND BETTER
BERLIN — Trading up has become the winning ticket for Germany’s department stores and larger specialty chains.
In the struggle to win consumer attention in what remains a very sluggish sales environment, retailers are finding that the only way to go is up.
And this is despite the fact — or rather because of it, as market analyst Thomas Claussen suggests — that Germany is a country of price-conscious shoppers.
“At some point, the problem [for retailers] becomes how to escape price comparisons, and one way is through higher positioning. The department stores have been upscaling and installing more in-store shops to bring in more variety. It’s been very lucrative to lift quality levels,” added Claussen, a partner at Andersen Consulting in Munich.
Kaufhof, one of Germany’s two department-store chains and a division of Metro, is a case in point. In 1988, Kaufhof began experimenting with its more up-market Galeria concept, bringing light, space, a design-conscious layout, more sophisticated displays and fixtures, and a stronger emphasis on brands and in-store shops to Germany’s typically cluttered, bargain-basement-like department stores. Today, the 70 Kaufhof Galeria stores — refurbished at a cost estimated in the billions of marks — outperform Kaufhof’s more conventional department stores. In 1999, Kaufhof Galeria posted a 1.2 percent sales gain, compared to the 1.1 percent downturn for the remaining 60 Kaufhof doors. Together, 1999 sales reached $3.8 billion. (Dollar figures are converted at current exchange rates.)
“Galeria’s been our sales leader for years,” stated a Kaufhof spokeswoman. “It’s an in-store shop concept. We live from our brands, and when new brands come in [to the German market] that are a must have — like Tommy Hilfiger — we must move to get them.”
At the same time, Galeria has been expanding its private-label business as a way of differentiating its assortment and strengthening margins.
“We treat our private labels as brands,” the spokeswoman noted, and there are 12 women’s house labels ranging from foundations, underwear and stockings to junior sportswear, complete women’s collections, large sizes, and as of fall 1998, the designer and jewelry label Caren Pfleger Signature, which is featured exclusively in about 20 Galeria houses.
Besides Galeria, Kaufhof has also tested several other more specialized retail formats. The active-oriented Sportarena now has 12 doors, the mixed lifestyle concept Lust for Life has 2 doors, and the “women’s only” Emotions, which carries cosmetics, intimate apparel and accessories, has been rolled out to three locations, with more expected to open.
These retail formats are just one way Kaufhof hopes to better respond to consumer needs. This June, the department-store group introduced Galeria TV, which it bills as “the first interactive customer TV channel.” Five hundred Galeria customers in Dusseldorf have already been outfitted free of charge with a set-top d-box with integrated modem and remote control, and the company hopes to have 1,000 hooked up by the end of the year. The once-a-month TV magazine features information about products, departments, service, advertising and special events, plus local tips, a cooking program and a game show. During the program, viewers will be asked questions, which they can answer via the d-box; the data is then transferred to the Galeria TV central computer. Besides strengthening consumer dialog and relations, Kaufhof said Galeria TV can also help test new products and services.
When it comes to private-label and price-conscious apparel, C&A led the field in Germany — until the mid-Nineties, when sales and profits at Germany’s former number-one apparel retailer and pioneer vertical operation started to nose dive. Between 1993 and 1998, sales in Germany fell by over $1 billion to $3 billion, despite 19 additional doors. The European chain, headquartered in Belgium, currently operates 560 doors in 12 European countries, though in June it announced plans to close down its 110 doors in the U.K.
C&A’s problem in Germany? Increased competition from newcomers like the Swedish fashion chain H&M stole the show with more focused assortments and much faster turn-around times. Very trendy — and expensive — advertising couldn’t hide the dreariness of presentation and product inside the stores, and C&A’s less-than-flattering moniker stuck: “Cheap & Awful.”
But the retailer is out to change all that. In 1998, a fresh look was unveiled in its Aachen and Dusseldorf stores, and by 2003, all 192 branches in Germany are expected to be modernized at a cost of over $250 million. The new stores are more open and inviting, featuring a harmonious mix of standard departments, theme presentations and in-store shops. There are lots of built-in fixtures and atmospheric touches like accent carpets, photographs and posters or fanciful display furniture at point of sale. The colors are warmer, the lighting softer and the store windows much more stylish. In 1999, C&A’s European headquarters in Brussels brought in American Les Satinover to spruce up C&A’s visual merchandising with a team of nine unit leaders. And it shows.
C&A has tightened its brand management, reducing its house labels to 13 from 20. The goal: a clearer profile for each brand that’s more clearly geared to specific target groups. Germany’s largest department store, KaDeWe, the Karlstadt department-store chain’s independent flagship in Berlin, got a five-year, $250 million makeover, which was completed in 1996. The 650,000-square-foot emporium put greater emphasis on in-store shops in its polished new format, and designer and upper-end fashion collections got more space. New to the lineup: Toni Gard and Thierry Mugler, joining Escada, Strenesse, Rene Lezard, Windsor and Bogner, among major fashion brands.
Exclusivity, however, does not play an important role in large-scale retailing in Germany. Finding fashion’s next hot name — and getting it first — is not a priority, except, perhaps, at Berlin’s Quartier 206 Departmentstore. Opened in September 1997 on Friedrichstrasse on the east side of town, the Departmentstore in the Quartier 206 luxury shopping complex aims to offer discerning Berliners and visitors a handpicked selection of high-end merchandise.
The women’s assortment includes such brands as Alberta Ferretti, Alaia, Armani, Burberry, Comme des Garcons, Dolce & Gabbana, Gaultier, Lezley George, Hugo Woman, Michael Kors, Marc Jacobs, Marina Sinibaldi, NN, Narciso Rodriguez, Ozen, Prada, Tracy Feith, Tocca, Valentino and Yohji Yamamoto, with Guy Laroche, Halston, Richard Tyler, Ben de Lisi, ABS and others in the evening “couture” department.

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