Frankfurt Miguel Müllenbach goes into raptures. The CEO of Galeria Karstadt Kaufhof stands on the sixth floor of the newly renovated Frankfurt city center branch, looks through the glass facade at the skyline and says: “This is a milestone for us.”
With three completely renovated stores in Frankfurt, Kassel and Kleve, the retailer presented its ideas for the department store of the future on Wednesday. All 131 branches are to be gradually converted to the new concept, more modern, better tailored to the locations and with completely new services – stationary and digital.
But this task will take years and devour high three-digit million sums. 50 to 60 houses are to be completely rebuilt, the rest at least adapted. Experts are skeptical that this conversion can really succeed.
“The concept is fundamentally interesting, but implementing it is a Herculean task,” says Jörg Funder, retail expert from the University of Worms. “The customers have great expectations, but they will not be able to convert all the houses quickly enough.”
Top jobs of the day
Find the best jobs now and
be notified by email.
If the customer finds the old offer under the new brand, disappointment is inevitable, warns the retail expert. “The changes must be felt quickly, the lack of speed threatens to become the greatest risk.”
Estimated five years for the renovation of all houses
There will be three different types of department store in the future: Ten to 14 branches will be so-called cosmopolitan stores like in Frankfurt, with premium brands and a sophisticated ambience. Around 50 are to become “regional magnets”, in which partners complement the offer, from hairdressers to e-bike stations to the city’s citizens’ office.
The rest of the houses are to become “local forums”, a “neighborhood format” as the company calls it. More practically oriented product segments are to be offered there, supplemented by regional products.
“We now have to get into the rollout quickly.”
(Photo: dpa)
Galeria boss Müllenbach estimates that the renovation phase will take five to six years. “We now have to get into the roll-out quickly,” he knows. He is confident that the changes will soon be felt.
Gerrit Heinemann, trade expert at the Niederrhein University of Applied Sciences in Mönchengladbach, is less confident. “Galeria has a problem with implementation,” he emphasizes: There is hardly a company that has paid so much consultancy fees over the past 20 years as Karstadt and Kaufhof. “All of these ideas, which are now presented to us as new, were already there as concepts, but were never implemented,” says Heinemann.
He definitely appreciates what has been created in the Frankfurt branch, for example. “I hope you can feel a change,” says Frank Bertsch, who runs the building at Hauptwache, on the first tour. “A few years ago we would have occupied the entire area with goods, today we treat ourselves to transparency, space and lots of light.”
Sushi from TV chef Steffen Henssler
He is particularly proud of the so-called “Airétage” on the sixth floor, a large area designed with wood and shades of blue, where in future affluent tourists from Asia, Russia and the Middle East will be able to rest from shopping with a view over the city. In addition, they are offered an assortment of goods that are precisely tailored to their needs – from cuckoo clocks to luxury perfumes.
The gastronomic offer will be a highlight. The seventh floor houses the restaurant with a roof-top bar and a sushi island operated by a team from TV chef Steffen Henssler. In the basement there is a market hall on almost 2000 square meters with 700 types of cheese, a twelve meter long fish counter and a champagne bar.
“All the stops are now being pulled out for the stationary appearance, this will reflect the latest state of shop construction,” says retail expert Heinemann. But that doesn’t solve the problems, he is convinced. “The real reinvention of retail has to take place where it is not visible at first glance – with the digital extension with the app.”
All 131 branches are to be gradually converted to the new concept.
(Photo: dpa)
Galeria has announced that its own app will not only offer many new services, but will also network local partners. For example, you can use it to book an appointment with the hairdresser or to collect your new identity card from the citizens’ office in the Galeria branch. But the key question, according to Heinemann, is whether the company can really offer completely app-based purchases through to cashless payments in the future.
Retail expert Funder also warns not to be dazzled by the flair of cosmopolitan houses. “It will be interesting to see how they implement the new concept in the smaller cities, that will be the greatest challenge,” he warns. Bundling all the local lone warriors in one marketplace, both stationary and digital, is practically impossible. “The technical connection of local actors such as city administrations and service providers is particularly difficult,” he says.
Experts consider the investment budget to be too low
According to the experts, the most critical point of the renovation is the financing. “What they are promising customers now cannot be kept with the calculated investment budget,” says Heinemann.
The sums for a company that only recently needed a € 460 million state loan to survive are quite ambitious. Galeria intends to invest a total of 600 million euros in the coming years. 400 million euros of this is to flow into the modernization of the houses, 100 million euros each into logistics and the expansion of e-commerce.
The Frankfurt branch already shows how tight this money is. According to the Galeria boss Müllenbach, 800 euros per square meter were invested there. With an area of 30,000 square meters, the investments add up to 24 million euros – but including contributions from partners. Müllenbach puts the funds invested by Galeria itself at 30 million euros for Frankfurt and Kassel combined.
The problem: “Everything that flows into the houses is missing digitally,” says Heinemann. Galeria actually needs the announced investments of 600 million euros for the e-commerce offensive alone. And even that would hardly be enough in his estimation. “The rule of thumb is: For every euro expected annual online sales, I have to invest one euro, provided that it is real new sales without cannibalization,” he calculates.
According to information from Galeria boss Müllenbach, online sales are expected to quadruple from currently 200 million euros in the next three to four years. This means that investments in e-commerce should be around 800 million euros instead of 100 million euros. “There is a great risk that the money will fizzle out ineffectively,” warns Funder.
Klaus-Dieter Koch, owner of the Brand Trust consultancy, sees a fundamental problem with the new concept. He thinks it is a mistake to put three different types of department store under the same brand. “That can’t work because it confuses customers,” warns the brand expert. “Brands always have to be unique.”
In any case, the use of the Galeria brand is unfortunate, said Koch. “It was already used in Kaufhof times, but never caught on,” he points out. “If the company now wants to offer something new, but does it under an old, previously unsuccessful brand, that doesn’t really seem credible and future-oriented to the customers.”
More: Galeria CEO Miguel Müllenbach explains the new concept in an interview