Retail reboot

Karstadt's Savior?

karstadt_HB
My customers are always right.
  • Why it matters

    Why it matters

    The Karstadt department store chain has been undergoing a restructuring programme since it was declared insolvent in 2009. But cost savings and a new retail concept may not be enough to save it.

  • Facts

    Facts

    • The department store chain has more than 80 stores across Germany.
    • Last year Karstadt suffered losses of €130 million ($165 million).
    • As part of its cost-cutting programme, six stores will close next year.
  • Audio

    Audio

  • Pdf

Karstadt is Germany’s biggest department store chain, with more than 80 stores. But it has hit hard times, and last year suffered a €130 million ($165 million) loss. It is now implementing a restructuring programme, which last week led to the announcement of six store closures, with more likely to follow.

During the interview in the Hyatt Hotel in Düsseldorf, the 51-year old was open and candid, he just wouldn’t let the restructuring and future concepts for the troubled retailer out of his hands that he had presented to the supervisory board on Thursday and had brought with him.

Mr. Fanderl, when was the last time you were in one of Karstadt’s stores?

A week ago in Cologne, where I live with my family.

And did you buy anything?

No, it was a standard store visit to one of our profitable locations during which I discussed with the store manager the changes he had made and what he has planned.

Not all of the Karstadt stores are, in fact, profitable. You are moving from head of the supervisory board to the chief executive’s chair. Why are you inflicting that on yourself?

There can be no talk about “inflicting.” The Karstadt brand is an icon, even if it has had a lot of pain inflicted on it in recent years.

By whom?

I’m not going to make a big show of coming to terms with the past but Karstadt has lost almost 30 percent of its customers aged between 35 and 40, and also the over-50s, since its insolvency in 2009 . . .

. . . who are actually considered very loyal.

Exactly. According to experience, they are our best and most loyal customers and we have to get them excited about Karstadt again. The company hasn’t been able to do that in the last four, five years . . .

. . . when the investor Nicolas Berggruen was owner?

Karstadt had lost sight of its core target group during that time, and is now  paying the brutal price.

And now that you have taken over, everything will get better? You are the third CEO in the last 12 months alone.

Now, with René Benko we above all have a new owner who is following a plan I can work with. It has taken time, but everybody – even the employees, the works council, and the union – has recognized that Karstadt urgently needs to be restructured. That means we have to act now. And we can. That doesn’t mean my future post won’t be any less taxing, but the jobs with the greatest challenges are also always the most fascinating.

What can you do better than all your failed predecessors?

Karstadt needs someone who knows the market, customers and competition. I grew up in German retail. My family have been in the trade for five generations. I know what it means to fight every day for customers. Maybe my management style will also help; to bring people along but to call the shots when things have to move fast. Our restructuring program, called “Fokus,” is a pretty big deal, even for German retail. But I have the experience and the determination to carry out the program.

More than 20 of the 83 Karstadt department stores are losing money and are on probation. How much time do you give a store for a turnaround?

That depends on how much of a financial cushion Karstadt has as a whole. We are currently more stable than a year ago and don’t have to decide ad hoc. Every retailer has a list with locations that don’t earn money. But our list, with more than 25 percent of all our stores, is long, much too long – some of them are even in the “deep red.” No retail company can endure such a burden in the long run.

Does that mean you will be quickly shutting down some stores after all.

Yes. In the coming year we will first of all be closing two department stores and two so-called bargain centers, and the two K-Towns (subsidiaries specializing in young fashion). These stores have been in the red for a long time and according to our analysis there is no possibility of turning them around – among other things because of the buying power, the competitive situation at the location, or because, as with K-Town, the concept wasn’t accepted.

This decision will affect some 350 employees. And there are another eight to 10 stores where the situation is similar. We will look for individual solutions for each location; for example, by discussing alternative uses for the location with the landlords and whether there is a possibility of getting an early exit from the rental agreements.

Restructuring is one thing, winning back customers is another. Why will you succeed where all those before you failed?

Andrew Jennings (a former Karstadt chief executive) had dreamed of an international department store in Germany but it didn’t suit the local customers. Eva-Lotta Sjöstedt wasn’t at Karstadt long enough to put any strategy into action, but she had a couple of good ideas that we have now considered in our plan. What is new is that we not only know the way forward but now for the first time are also resolutely working on what we are efficient at and will take that path.

Can you be more specific?

There are two groups of customers in a department store: the customers who want to be inspired and the customers who just want to take care of their shopping needs in comfort. We will divide all our stores countrywide into these two categories. We will then have “Karstadt 1881, the Experience Store” in cities like Munich or Hamburg and “My Karstadt” in Mannheim or Rosenheim, a local shopping center that is more orientated toward comfortably satisfying shopping needs.

After only two months of new ownership we have now presented a comprehensive, 100-page concept for Karstadt called “Fokus+” in the supervisory board meeting.

 

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