If you want to buy a new gadget, you could go to a store, or you could go online. Unfortunately for brick-and-mortar retailers, customers are increasingly choosing the latter. Sales of electronic appliances are booming at firms such as Amazon, in part boosted by consumers who browse in stores and then buy online.
So Germany’s MediaMarktSaturn, Europe’s biggest electronic retailer, has decided to fight back. It intends to challenge the likes of Amazon by forming a partnership with French counterpart Fnac Darty.
The two companies have signed a memorandum of understanding to create a “European Retail Alliance,” which will see them cooperate in key areas such as purchasing, licensing and research. MediaMarktSaturn CEO Pieter Haas likened it to an airline alliance such as the Star Alliance, with the grouping being open to other parties.
“That shows that you can work together without always having to take over companies,” he said. “I firmly expect further members to join us in the coming months.”
Ceconomy’s shares have lost almost 30 percent since the start of the year.
But the alliance faces an uphill battle. MediaMarktSaturn, majority-owned by German parent Ceconomy, is under pressure to take action following a disappointing Christmas quarter and falling earnings. Ceconomy, spun out of the retail giant Metro last year, also owns 24 percent of Fnac Darty.
The partnership aims to address this by getting as many European electronics retailers on board as possible to create a counterweight to international competitors like Amazon, eBay and Alibaba. This will give them more clout in talks with big suppliers such as Apple, Huawei, Sony and Samsung.
To be sure, MediaMarktSaturn and Fnac Darty are heavyweights in their markets, generating revenues of €22 billion ($26 billion) and €7.4 billion respectively last year. But they’re minnows compared with Amazon, which had global revenues of around €150 billion in 2017, including some €14 billion in Germany. It has been Germany’s favorite online retailer for the past three years.
Size isn’t Amazon’s only advantage. As it’s purely online, it knows much more about its customers than its two European rivals, who are firmly rooted in physical store networks.
Amazon is also far more dynamic. It has increased its revenue fivefold since the start of the decade, while MediaMarktSaturn has grown less than 10 percent. The leading manufacturers are far bigger too. Samsung and Apple each generate more revenue in a single quarter than MediaMarktSaturn does in a whole year.
That’s why the Europeans need to work together, Mr. Haas believes. By joining forces, they’ll be able to hammer out more favorable terms with suppliers. They also want to start purchasing their own-brand products together to get better prices from manufacturers — that’s especially important because own-brand sales deliver the highest margins.
In addition, they plan to pool and develop their data analytics knowhow. MediaMarktSaturn and Fnac say they have a combined 8 to 9 million customer interactions per day. The French firm will also join MediaMarktSaturn’s Munich-based “Retail-Tech-Hub,” a start-up incubator, and there will be a similar center for young, innovative retail firms in France.
Retail analysts are undecided about the alliance’s chances of success, but Karsten Rahlf of Nord LB said he liked companies that manage to combine an established bricks-and-mortar business with an online presence.
One thing’s for sure: MediaMarktSaturn needs to take action. Ceconomy’s shares have lost almost 30 percent since the start of the year.
Joachim Hofer covers the sports, leisure and IT sectors for Handelsblatt. To contact the author: firstname.lastname@example.org