Bangladesh disaster

Cheap Clothes for the Masses

Heinz Speet - keeping it cheap at KiK. Source: Dirk Hoppe for Handelsblatt
Heinz Speet - keeping it cheap at KiK.
  • Why it matters

    Why it matters

    Budget fashion retailer KiK has been criticized over the poor working conditions at its suppliers’ factories in Asia.

  • Facts

    Facts

    • KiK has more than 3,200 stores in ten European countries and revenues of about €2 billion ($2.11 billion).
    • Heinz Speet co-founded KiK in 1994 and became CEO in 2012.
    • Hundreds of workers have died in fires at KiK-supplier factories in Pakistan and Bangladesh since 2012.
  • Audio

    Audio

  • Pdf

Heinz Speet, 56, was trained as a retailer and began his career at food retailer Coop. He switched during the 1990s to the textile sector — first at Takko, finally at KiK. Family-owned retail group Tengelmann owns 80 percent of KiK. Many of its items are shipped via rail, mostly by using German railway operator Deutsche Bahn, which has been beset by strikes.

 

Handelsblatt: Mr. Speet, can you even bear to hear the word “strike”? Germany’s train drivers just blocked the transport of your goods. And it is only a question of time until the trade union Verdi organizes yet another strike at your central warehouse to press for the retail-industry pay scale.

Heinz Speet: I have no sympathy for this at all. What you find here is an independent logistics company that is a service provider for our company. We don’t really stock goods here. The articles come in through 65 gateways on one side, then they are selected and go through the 70 gateways on the other side, back out to our stores. How can you squeeze that into a retail-industry pay scale?

Do you see any possibility at all of compromise regarding this issue?

No, we can’t meet in the middle, because there is no middle. First, we have paid an internal minimum wage for many years, and second, we orient ourselves here to the standard rate for logistics and pay the upper average for the sector. If our wages were as bad as is claimed, then we would have problems hiring employees. But we don’t have those problems. Therefore there will definitely not be a retail-industry pay scale at our company. We’re sticking to our guns.

But you can live with the minimum wage?

That’s okay for us, because years ago we began paying an internal minimum wage that early on was oriented toward today’s minimum wage. That definitely hasn’t led to jobs being eliminated at our company by hiring temporary personnel. On the contrary, we have created many jobs for temporary workers that require social-insurance contributions. That means we replace temporary positions with permanent jobs.

But the image of the retail industry as an employer is rather negative.

As a company in the retailing sector, we don’t need to hide what we contribute to the general welfare. The retail industry is one of the largest employers in Germany. In particular, we offer jobs for the so-called educationally disadvantaged section of the population. Where does a pupil from a secondary school, possibly with no diploma, still have a chance to learn a profession today? He always has that opportunity in retailing. Otherwise, no one has anything to offer these sorts of people.

Still it doesn’t sound like a particularly stimulating profession …

I was trained as a retailer and started by selling bananas. I know that at a first glance the job isn’t sexy — because of the hours. But once people start working in retail, they look at it with other eyes. Where else can you get going on a career at so young an age and soon take over management responsibilities?

Why doesn’t your company become more actively involved in what are to some extent miserable working conditions in Asia?

You are speaking of the tragic events in Bangladesh and Pakistan. Both have led to widespread public discussion. There is something good about that — we become involved in the debate, for example in Handelsblatt. But it is also difficult to explain these interconnections in talk shows on television.

But what is much more important is that you change something in the affected countries.

We frequently don’t even have support from the authorities on-site. For example, the factory Rana Plaza in Bangladesh was evacuated one day before its collapse, because cracks had been noticed in the walls. But the next day, no government monitors were there to prevent people from returning to work. We can’t be on alert 24 hours a day to see if all regulations are being adhered to.

So why don’t you cancel your production if you don’t have enough support from local authorities?

Because at the end of the day, that wouldn’t help the people there. Things will only change when companies band together. In the meantime, almost 200 firms have signed an agreement to provide financial support for many measures to improve working conditions.

What are you doing in order to improve working conditions?

We were the second German textile company to sign the international fire-protection protocol, the so-called Bangladesh Accord. We thereby took a step on a path that is far from being ended. We take this quite seriously. Many suppliers have been audited in the meantime, and many were closed after the investigations. But you also have to give these things time.

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At your low prices, are you able to offer quality goods at all?

Yes, because we pre-order a long time in advance, six or 12 months in some cases. We sell mostly basics, a white T-shirt or simple pair of jeans. For example, we sell 10 million American T-shirts per year. So our supplier can keep his factories operating when he doesn’t have any other orders — and we get good prices. Expensive clothes aren’t better produced than our wares. And we know what brands all run through the same production lines.

Here in Germany, there is much discussion about sustainability and responsibility — but at the end of the day, are your customers really interested in production conditions?

No. What interests customers first of all is the price, and most of them don’t have a bad conscience. If you ask customers in front of a camera whether they are ready to pay a higher price for better production conditions, then most of them say “yes.” But as soon as the camera has been turned off, they are back making their purchases where prices are lowest.

So you relieve the customer of his responsibility?

I think it’s totally wrong to preach morality to customers and make them responsible for what happens there. What is more, in Germany we have more than 12 million people who have to live on less than a subsistence income. They can’t do anything other than to buy the cheapest products available. It doesn’t matter to them where the goods come from. Especially since almost all brands — from luxury to discount — are often produced at the same factory.

So companies have all the more responsibility.

Of course. As commercial enterprises, we have to improve the conditions — together with the governments and agencies. Much has already changed, but all this takes a few years.

Is KiK through with expansion?

We still intend to expand in Poland; we are working on the assumption of up to 700 stores there. And in The Netherlands, we are aiming at around 300. In Germany, we now have around 2,600 locations. I hope that someday it will be 3,000 stores, because there are still lots of white spots (empty areas). With the new concept, we also have the chance of coming into shopping centers and top-grade locations where we might not have fit in before. And we’re using this chance.

 

Kirsten Ludowig is a Handelsblatt editor specializing in the trade sector, Florian Kolf is the paper’s deputy editor-in-chief. To contact the authors: ludowig@handelsblatt.com and kolf@handelsblatt.com

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