Dusseldorf The retail sector is experiencing historically poor consumer sentiment – Sostrene Grene, on the other hand, posted record profits in the past financial year up to the end of April. The Danish furnishing retail chain increased sales by 39 percent to the equivalent of 227 million euros. The profit of 28 million euros is the highest in the almost 50-year history of the company.
But CEO and co-owner Mikkel Grene knows that things won’t go on like this. “Realistically, I expect the current year to be more challenging, partly because of the global situation with the war in Ukraine, inflation and consumer restraint,” the family entrepreneur told Handelsblatt.
His recipe against the crisis: competitive prices. “We have found that our concept works well in times of crisis due to our low prices,” says Grene. And it should stay that way. “That’s why we don’t want the prices for the end customer to rise as much as the prices for us and our suppliers are rising.”
Retail: Sostrene Grene cuts margin to keep customers
Of course, this will have a negative impact on the margin in the current fiscal year, according to the co-owner of the family business. “But with a result this good, we can afford to help our customers at a time when they are under financial pressure.”
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Mikkel Grene’s hope for the upcoming Christmas business: “We hope that our customers will continue to experience that they can afford to shop at Sostrene Grene because of our very reasonable prices.” The CEO is reacting to the “somewhat hesitant consumer behavior” that he already observed.
Germany is the most important market for Sostrene Grene
In this way, Sostrene Grene intends to continue growing despite the difficult situation on the market. Especially in Germany, which is now the retailer’s most important market. The first branch in Hamburg only opened in 2016, today Sostrene Grene already has 61 shops in Germany – and there are soon to be significantly more.
The CEO and co-owner of Sostrene Grene wants to open 40 new stores in Germany in the next few years.
(Photo: Sostrene Grene)
“While the expansion opportunities in Denmark will soon be exhausted, Sostrene Grene is in many ways just beginning in Germany,” says Mikkel Grene. “We hope that we will have more than 100 German stores in the next three to five years.”
German customers expect further price increases and are buying less
Consumer sentiment in retail is currently at its lowest point: the consumer barometer of the German Retail Association (HDE) has fallen for the third month in a row and reached an all-time low again in October. According to HDE estimates, consumer sentiment is likely to continue to fall in the coming months. The survey of 1,600 people shows that consumers are expecting further price increases.
The furnishing industry is already feeling the effects of the reluctance to buy: Sales of furniture, lamps and decoration in online retail in Germany fell by 15.6 percent in the third quarter.
Ikea also has to pay attention to the prices
Even furniture giant Ikea was unusually reticent when it published last year’s results. After all, Ikea was able to increase sales last year by 5.6 percent to 39.5 billion euros. But CEO Jesper Brodin also said: “The past year has tested us like never before.”
Brodin therefore wants to keep prices under control: “Being affordable is in our DNA and is the focus of our business. It has never been more important than now that we are seeing such a rise in the cost of living.” The Swedes are apparently pursuing a crisis strategy similar to that of Sostrene Grene.
Sostrene Grene: A labyrinth full of odds and ends as a recipe for success
Mikkel Grene’s parents, Inger Grene and Knud Cresten Vaupell Olsen, opened the first shop in 1973. At first glance, Sostrene Grene contradicts many of the certainties in the industry: the shops are labyrinths full of a motley assortment of odds and ends, from kitchen appliances to decoration and small pieces of furniture. The range is constantly changing, classical music is playing in the background, and until recently there wasn’t even an online shop.
In addition, the couple knitted a story about the Grene sisters, as the company name translates. Anna and Clara Grene, fictional characters based on the founder’s aunts, adorn the company’s logo and provide interior design tips on signs in the store. The employees of the company are called “sisters” internally.
“We attach great importance to offering customers a wonderful shopping experience and a break from hectic everyday life,” says the company boss, describing the concept. Even successful products are dropped from the range after a while in order to offer customers variety – and the feeling of having a product that not everyone has. Every visit should feel like a treasure hunt for great finds, says Mikkel Grene.
For Sostrene Grene, it was worth focusing on the shopping experience. The company grew steadily, after almost 50 years one shop has grown to 250 branches in 15 countries.
Sostrene Grene’s online shop only started in 2020
But the focus may also have been a reason for the late entry into online trading. Under the second generation of owners, it should now become an important growth driver. The online shops started in Denmark, Germany, France, Sweden and the Netherlands in March 2020, followed a year later by Norway.
“We originally planned to launch the online shops in six markets over a period of three years,” says Grene. However, due to the pandemic, the three-year plan became a one-year plan: “In this way, our digital transformation has progressed much faster than originally thought.”
The entrepreneur does not name sales figures for the web shop and obviously sees it more as a shop window: “We experience that customers see a product online that they are interested in, which prompts them to visit a local shop,” he says. The company’s sales at least increased in double digits during the pandemic.
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