analysis
The new owners of the Galeria Karstadt Kaufhof department store group want to continue operating 76 branches. But how can they survive in the long term? Experts say: A lot of money has to flow.
If the planned closures continue, the Galeria Karstadt Kaufhof department store group will still have 76 locations from September. And if the creditors agree to the insolvency plan presented yesterday at the end of May, insolvency administrator Stefan Denkhaus wants to hand over the company to the new owners NRDC and BB Kapital SA by the end of July.
Even if these steps have been taken, the overriding question remains: What needs to happen so that the remaining locations are viable in the long term – and so that the around 11,400 jobs are secured in the long term?
Since the crisis-ridden department store group filed for its third insolvency proceedings in three and a half years in January, opinions have diverged widely. The company managers and of course the new owners in particular are optimistic.
“Galeria’s economic prospects are good. I have no doubts about that,” explained Denkhaus on Monday. The risk of another insolvency in the near future is low and is “within the general economic risk”.
The investors’ concept is still pending
They will probably have to explain by the end of May how the new owners specifically want to bring the remaining houses forward again. Above all, retail experts see a high need for investment.
“We expect the new owners to invest in the company and develop a viable future concept together with the employees,” explains Marcel Schäuble, ver.di negotiator at Galeria. “For example, the 200 million promised from René Benko’s last insolvency plan were not received due to the insolvency of Signa. They were planned for the realignment of Galeria together with investments in cash register systems and IT and will remain so for a secure future.”
More skeptical tones can be heard primarily from experts in the retail industry. For years, Gerrit Heinemann from the Niederrhein University of Applied Sciences has argued that the classic department store concept no longer has an economic future. “The customer apparently no longer finds the department store attractive,” said the expert. The experiences of the past few years seem to prove him right.
Know-how of the workforce
Carsten Kortum from the Baden-Württemberg Cooperative State University Heilbronn also emphasizes that Galeria’s business model needs to be significantly more innovative and digitally oriented in order to have a future. But what exactly should be done? “Stationary trading and online trading at Galeria must no longer be operated in parallel,” said the retail expert. Customers would have to see both channels as one.
As far as the remaining locations are concerned, individual “lighthouse branches” showed before the bankruptcy how frequency and sales could be increased, explains Kortum. A regional focus and “attractive product ranges as core retail services” have proven successful here.
Ver.di negotiator Schäuble refers to the know-how of the workforce: “The employees must be involved in the orientation of the product range. They have given many tips in the past that went unheeded.”
Despite great demand, product ranges such as fabrics have been significantly reduced or completely removed from the range in many branches. Employees’ suggestions about future trends often went unheard. “Sales are being left behind here,” said Schäuble. “Such wrong decisions must be avoided in the future.”
Crucial point investments
So far, only ten of the remaining locations have been converted to modernized concepts, says economics professor Kortum. In the other stores, however, there is a backlog of investment: “The turnaround can only be achieved with investments in the 66 branches that have not yet been converted to current concepts and a long-term commitment, but certainly not with short-term profit thinking.”
The expert is alluding to the practice of previous investors of renting branches, sometimes at excessive conditions, to owners who belonged to the parent company. This means that financial resources have been withdrawn from the business model, says Kortum. High rents played a major role in the decision as to which branches were allowed to continue to exist.
The retail expert puts the funds needed for the conversion at “a high three-digit million amount up to billions”. Since outside investors will hold back after the third insolvency, the new owners would have to bring appropriate capital with them.
More choice – and more service?
But based on previous experience, most observers remain skeptical. “It doesn’t look like a liberation move, more like a continuation of previous concepts,” says Kortum. “Customers will see little change in retail services in the short and medium term and therefore no more choice, service or experience.”
When the new owners present their future concept in the coming weeks, observers will pay particular attention to one point: how much money they specifically want to spend on modernizing the locations.