Family Values

German retailer Conrad Electronic is taking on Amazon and Google

Conrad Electronic, Conrad, robot
Ttrusty family robot. Source: DPA

German electronics retailer Conrad Electronic, founded in 1923 and based in the sleepy Bavarian town of Hirschau, faces a tall order keeping up with the Amazons of this world.

The family-owned firm sells a broad range of techie goods through its 32 outlets across Europe. Drones, robots and rolls of wire are all in stock. Founded in Berlin by Max Conrad, who invented one of the first television construction kits, the company is fighting to stay with the times. Profits halved to €12.3 million ($15.2 million) in 2016 on revenue that was up slightly at €1.072 billion. But Conrad is still fairing better than its American counterpart RadioShack. While both companies were started around the same time, the American retailer filed for bankruptcy back in 2015.

Despite this, Conrad refuses to sell out on values for profits. You won’t find computer games because supervisory board chief Werner Conrad, 57, the great-grandson of company founder Max, is opposed to the first-person shooter genre.

“I’m the last bastion on this issue for my sales staff,” Mr. Conrad told Handelsblatt, adding such violent games have emerged from US army training software designed to teach soldiers to kill. “I know how much money we’re forgoing but I think you’ve got to take a stand on an issue like that.”

Conrad Megastore in der Hütteldorferstraße in Wien Österreich PUBLICATIONxINxGERxSUIxAUTxHUNxONLY 1
Ideals not for sale. Source: Imago

Conrad Electronic has also chosen to stay in Hirschau, where it’s the largest employer, despite the location close to the Czech border being tricky for logistics. Instead of taking subsidies and setting up elsewhere, the company recently expanded and modernized its logistics center in Wernberg-Köblitz, some 15 kilometers from Hirschau, where robots now whir among the shelves.

The strategy is to beat out “suppliers and third parties … wedging themselves between the retailer and customer,” as Mr. Conrad puts it. Customers might buy their first Amazon Echo in a Conrad store but from that point will be conversing with their smart speaker rather than Conrad Electronic’s blue-shirted sales assistants – and will likely buy their next Echo directly from Amazon.

It’s a bold response. “We’re trying to build an ecosystem with the right partners that will play in the top league at least for a while,” said Mr. Conrad. The company has launched the Berlin-based project Conrad Connect to offer a platform for smart homes, hooking up Amazon’s Echo with intelligent LED lamps from Innogy and smart heating control systems from Tado. Conrad customers are to become Conrad users – that’s the plan, and it pits the company against Amazon, Google and Deutsche Telekom.

The problem is that size matters when it comes to platform wars. “But you often also see that it helps to have a head start,” said Mr. Conrad defiantly.

Lars Riegel, smart home expert at consultancy Arthur Little, said Conrad’s system does have advantages over Amazon and Google. He said it takes time to configure Conrad Connect. But after that, users have a lot of freedom in what equipment to connect to and what commands to enter, he said, adding that Conrad’s approach will cater more to tech geeks and DIY enthusiasts. “I don’t think we’ll end up with just one smart home platform.”

The platform, which already has 125,000 users, has a few neat features: lights can go on at night while home owners are away, flower beds can be watered and the heating can be switched on a few hours before coming home. In the medium term, Conrad Connect aims to cater for third parties such as security companies and home-care services.

Its market is evolving so fast that it’s hard to predict what Conrad Electronic will look like when it celebrates its 100th anniversary in five years. Mr. Conrad admitted that he would be open to a strategic partner, but not a purely financial one.

His daughter is 19 and he doesn’t want to push her into becoming his successor. His own decision to relinquish the CEO position in 2012 to a non-family member after 15 years at the helm was intended to prepare the firm for the family’s possible withdrawal from management, although he remains a hands-on supervisor.

“The world is no longer one in which we as a company can do everything on our own. There’s a limit to our ability and desire to do that,” he said. “We’re trying to remain a family-owned business for as long as possible.”

Alexander Demling is a reporter for Handelsblatt. To contact the author:

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