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Sunday, 30 June 2013

Current Dutch Minister of Traffic and Waterways ‘forgot’ in 2010 to mention her husband’s stock interest in important business partner of her former Ministry of Infrastructure and Environment.

Ignorance is bliss
Problem solved with just one kiss

In The Netherlands, the liberal-conservative VVD is the party of ‘law and order’: small crimes and misdemeanours must be punished vigorously. Also people who receive state welfare or unemployment benefits and who violate the conditions for receiving these social security arrangements, must be penalized for their faulty behaviour: here is the tax-payer’s money at stake.

VVD politicians and members of parliament have traditionally strong opinions on these ‘spongers from the civil society’. They show no mercy or understanding, when it comes to reducing or totally cutting off social security payments from (first-time) offenders. Explaining that you made a mistake, won’t help you with the Dutch law-and-order party. “If you can’t stand the heat, get out of the kitchen” is the general opinion among VVD-members.

The same VVD-politicians and MP’s, however, are NOT so harsh and straightforward, when it comes to judging their own faulty behaviour. The condemnable behaviour of province delegate Ton Hooijmaijers for Noord-Holland or the soap opera concerning ex-senator and alderman for Roermond Jos van Rey did not lead to a massive ‘mea culpa’ by VVD party members.

Neither did “billboard-gate” for the current state secretary of Tax Affairs Frans Weekers: the earlier mentioned alderman Jos van Rey, in cooperation with the local real estate tycoon Piet van Pol, paid a large billboard along the highway for Frans Weekers.  At the time, both Van Pol and Van Rey already had been under heavy fire for reputedly paying/accepting bribes and for claims of corruption. It was a typical ‘Limburg-style’ gift for Weekers, who wanted to reclaim his position as MP for the VVD: a gift seemingly ’without obligations’ towards the generous donor.

When the news about the billboard leaked to the national newspapers and Weekers got into political trouble, his defence was something like this: ‘In my opinion I did not do anything wrong, and if I did, I am sorry about it’. He promised to be a good boy and remained in his position, due to votes in his favor by PvdA (the coalition-partner of the VVD) and VVD itself, during ‘a vote of no confidence’. That was all. People, who don’t understand by heart that their behaviour has been condemnable, are not easy to scratch, as they simply ignore their own lack of morality.

Yesterday, the news was spread that another very prominent VVD-member has been accused of condemnable behaviour. This time, it is the current Minister of Traffic and Waterways and former Minister of Infrastructure and Environment, Melanie Schultz van Haegen.

KIWA is a commercial bureau, which has been appointed for the execution of official assessments and certification stages, by the Ministry of Infrastructure and Environment. KIWA is a former state agency, which has been privatized a few years ago. Melanie Schultz van Haegen’s husband had been the longterm owner of a large package of shares in KIWA.

Haro Schultz van Haegen had already a longlasting relation with KIWA and had been involved in the earlier privatization process of the bureau, well before his wife became Minister of Infrastructure and Environment. When his wife was applying for the position of minister, Haro Schultz created some ‘artificial’ distance between him and KIWA, by abolishing his position as counsellor of KIWA. However, the large package of shares was never mentioned during the job application of Melanie Schultz. In 2011, Haro Schultz sold his package of shares in KIWA for €3 million, earning a considerable profit from this deal.

The Dutch newspaper ‘Volkskrant’ discovered this grave omission a few days ago and wrote an article upon it. Here are the pertinent snips of this article:


During her inauguration as minister of Infrastructure and Environment, Melanie Schultz van Haegen didn’t mention to PM Mark Rutte that her husband was owner of a large package of shares in a company, which held close ties with her future ministry. In August 2011, Haro Schultz van Haegen earned almost 3 million euro with the sale of the special investment vehicle, which held the shares of this company.

The mentioned company is the certification bureau KIWA from Rijswijk, which takes care of the issuance of permits for the transport industry, by order of the ministry.

As a minister, Schultz van Haegen had a big influence on KIWA’s main business. She set the tariffs that KIWA was allowed to charge and she assessed the company, via the Inspection Living Environment and Transport. She also had to justify her decisions against the members of parliament and trade organizations, who complained about the permit monopoly and high charges of KIWA

In August 2011, KIWA was purchased by the private equity fund NPM Capital. With this sale, the shareholders of the holding company which held KIWA earned dozens of millions of euro’s. Haro Schultz earned €2.9 million, just as his business partner. He states: “KIWA’s growth soared at the time and all kinds of companies were added to it. Besides that, my counselling firm contributed substantially to the growth and success of the company”

The financial interests of Schultz van Haegen […] remained unnoticed, until now. In official records, kept by the Dutch market authority ACM, the business interest of the minister’s husband in KIWA remained invisible. However, this business interest can be found in a publication of the Italian peer of the ACM, the Autorità Garante della Concorrenza e del Mercato (i.e. ‘the Authority for Protection of Competion and Market’).

Haro Schultz van Haegen states that it was not necessary to mention his business interest in KIWA at PM Mark Rutte, when his wife was approached for a ministers position in the autumn of 2010: “I resigned as counsellor of KIWA. My possession of KIWA-shares was not of any importance. We wanted to play by the rules; that is how we are. Everything is arranged as written in the ‘Handbook for entering government officials. I was just an indirect shareholder and had no influence”.

[If you understand Dutch and want to investigate all the paperwork and data that the Volkskrant used for its investigation yourself, please use the aforementioned link to the article. The Volkskrant printed a number of PDF’s with additional information, like for instance the transcripts of an interview with the spokesperson of the minister.]

I am flabbergasted by the arrogant and stupid naivety of both the minister Melanie Schultz and her husband Haro. “My possession of KIWA-shares was not of any importance. We play by the rules”.

‘Trust us, we are decent people. Yes, really!’

Yes, Haro Schultz resigned his counselling position before his wife’s installation as minister.  And according to Melanie Schultz herself, she didn’t make any decision on the future of KIWA, during the time of Haro's KIWA share ownership: she stated this in the remainder of this article (not mentioned here). Although I personally find this very hard to believe, I cannot prove differently. 

Nevertheless, how could the minister and her husband ignore their possession of a package of shares with a sales value of €3 million?! ‘I was just an indirect shareholder’. Yeah right! With €3 millions in shares, you can hardly be called a simple, indirect shareholder. Then you are one of the big guys. 

Besides that, every decision upon the future of KIWA by his wife's ministry (certification tariffs, KIWA's monopoly position as a certification bureau etc.) directly influenced the value of his shares and thus - in the process - their financial future.

The fact which makes it more sickening, is that the VVD is the ruthless law-and-order party, especially for the poorest part of the Dutch society. At the same time, the party spreads ‘an enduring stench of not knowing where public interest stops and private interest begins’. 

You cannot blame unemployed or poor people for illegally receiving unemployment benefits and welfare or for working without paying taxes, when your party is enduringly involved in actions that are either straightaway illegal or at best travel the edges of legality and moral business conduct.

Ton Hooijmaijers, Jos van Rey, Frans Weekers and Melanie Schultz van Haegen seem to form a growing line of VVD-representatives, who went over to the dark side, without ever acknowledging that they did something wrong. When minister Melanie Schultz van Haegen has some conscience after all, she resigns and apologizes for indignified ministerial conduct. However, when looking at her predecessors in this ‘line of shame’, she will not do so.


I hope that the Second Chamber of Parliament (which probably means the PvdA in practice) has the ‘cojones’ to send her away, like it should!

Friday, 28 June 2013

Ernst’s Economy in discussion at BNR Newsroom: Will 2013 be the end of the classic retail stores, as we know them? Pt II

In the second part of the evening, Paul van Liempt spoke with Oger Lusink, the Dutch grandmaster of men’s business and luxury clothing and Jeroen Hubert, the marketing manager of Wehkamp.nl.  

First, Michel Koster of ABN Amro shared his comments upon the webstore, as a way of doing business. Paul’s question was whether brick & mortar stores could survive without having a webshop, nowadays.

Michel Koster of ABN Amro
Picture by: Ernst Labruyère
Click to enlarge
According to Michel, people should not underestimate the costs of maintaining a few brick & mortar stores and a well-designed professional webshop. It is an expensive way of doing business, which you should not enter thoughtlessly.

Designing a efficient and customer-friendly, high-throughput webshop is expensive, just like setting up and operating the distribution center that comes with it. Also the marketing operation (getting people to know your webshop) and the high rate of (often toll-free) return-shipments make it an expensive way of doing business. Often the best way to go, is cooperating with other B&M stores in a collective webshop, like ‘winkelstraatjes.nl’, or stepping into initiatives by the trade organizations.

Oger Lusink stated that he was a ‘reluctant’ webshop owner. He knows that the majority of his customers wants to feel his top-of-the-line fabrics himself and see the stitching and fine details of his men’s suits. That is simply impossible through a webshop. Nevertheless, he and especially his sons are aiming for a 80/20 division between brick & mortar store and webshop.

F.l.t.r. Oger Lusink of Oger and Jeroen Hubert of Wehkamp.nl
Picture by: Ernst Labruyère
Click to enlarge
The webshop is fine for selling ties, accessories and also for clothes for customers, whose detailed sizes already have been entered into the Customer Relation Management (CRM) system, which Oger operates.

Oger uses his CRM-system also for marketing actions towards his customers. When, for instance, he buys rare fabrics in special colours, which are sought after by some customers, he sends these customers a special notification.

Jeroen Hubert of Wehkamp.nl has no reluctancy at all, when it comes to online shopping. Wehkamp's strategy is ‘fully online’; even without one or two B&M ‘service’ stores. 

That was a conscious choice. With 145 million visitors per year and 1.8 million customers, their strategy can be called succesful. Although Hubert does not think that the brick and mortar store will ever decay, he points at the advantages of online shopping: “you can shop at your own favorite time, we have an enormous assortment and we have everything in stock, ready to deliver. When you don’t like it, you send it back or we collect it at your home: no questions asked.”

One of the biggest threats for Wehkamp.nl is that everybody can start a webshop himself in only a few days. There are many off-the-shelf webshop applications for sale and an ‘amateur webshop, run from home’ does not cost very much time and money to set up. 

Hubert: “Currently, there are 38,000 webshop in The Netherlands and every single one of them wants to beat Wehkamp.nl. All traditional B&M store chains start webshops, in an increasing number of product categories”.

Michel Koster challenges Wehkamp’s choice to operate without a few B&M stores. He states that Coolblue, an electronics chain, uses the combination strategy to great success: their lately opened B&M stores currently have the largest sales per square meter within the chain. Consequently, CoolBlue is planning to open more B&M stores, as some consumers want to see, touch and feel the products of their choice and are very much willing to drive a few kilometers for that desire.

Blokker is a very common chain of stores in household appliances, which can be found everywhere in The Netherlands. Ernst’s Economy asks if Oger Lusink fears the ‘Blokkerisation’ of the Dutch shopping centers: the phenomena that an increasingly small number of store chains fills 75% of the shopping space in the shopping streets and centers. As this phenomena makes shopping centers less ‘special’ and suitable for fun-shopping, this could prove bad news for a luxury store chain, like Oger.

Oger does not agree. He states that Blokker and Hema have an important function. They enable a good and diverse selection of products in shopping centers and have a complementary function, next to Oger’s stores. What frightens him, however, is the soaring number of empty shops in the shopping centers and streets.

Shopping streets in the center of town are often cannibalized by large shopping centers at the rims of the cities. This development causes many ‘ghost shops’ in the centers and bad margins for everybody in the business. Municipalities often only have euro-signs in their eyes and don’t think of the consequences of having too many shops.

The battle between online and brick & mortar stores is not the only battle going on in the retail industry. Also the battle between the supermarket chains is an interesting one.

Gerard Rutte, a genuine supermarket expert, and formula manager Geert-Jan Smits of the biological food-stores EkoPlaza talked about this. Paul van Liempt started the discussion with the question, if there would be a bloodbath among the supermarkets?

Paul van Liempt of BNR Newsroom
Picture by: Ernst Labruyère
Click to enlarge
Gerard Rutte confirmed that small supermarket chains definitely will be eaten alive. Yet there are 4,200 supermarkets in The Netherlands, of which many are small ones. In the next five years 500-600 supermarkets will disappear and a number of unsuccessful formulas will ‘melt away’. Only the good formulas will stay. 

Smits' EkoPlaza can be such a good formula: it is a chain of genuine biological foodstores with 100% biological products: not 'biological food-in-name-only'. 

Smits defends the 'A-minus' locations and lay-out of the EkoPlaza stores, against mild criticism of Rutte and states that his shops give a satisfactory shopping experience for his customers. Nevertheless, Rutte urges Smits not to wait with buying new store space, but act quickly. “If EkoPlaza doesn’t gather critical mass quickly, your chain is doomed”.

Among the winners will definitely be Lidl, the immensely successful German supermarket chain, according to Rutte. 

Lidl has its discount prices, its German quality products and its often surprising and very limited ‘hit & run bargains’: luxury products, like laptops and desktop computers, tablets, DIY-equipment and household appliances, that are for sale in very limited numbers at absolute bottom prices. Diehard shoppers sometimes flock together two hours before the store opens, if the product at offer is very cheap and rare.

According to Rutte, Lidl causes managers of Dirk van de Broek and Albert Heijn sleepless nights. Rutte is especially harsh about Albert Heijn (AH), the absolute number one in the Dutch supermarket landscape.

Rutte: "In better times Albert Heijn was a specialty store with an excellent assortment. These days, it has turned into a dull logistical supermarket ‘without flavour’. They concentrate too much on the online business and too little on the brick &  mortar stores"

The flipside is that AH is the only successful supermarket chain, when it comes to online business. Ahold N.V., the owner of AH, is also doing very well with Bol.com, an immensely successful book and convenience products store. 

Ahold purchased Bol.com from Bertelsmann for €340 million, which Rutte considered to be an absolute bargain price.

In spite of its dominant position on the Dutch groceries market, AH is not ‘home free’ yet.

Rutte: “AH is untouchable nationally, but locally their stores are very vulnerable. AH doesn’t want to cooperate with independent entrepreneurs, who know the local situation by heart. Ahold doesn’t have the tools to do so and it can’t fully support its local supermarkets, like it should.

Successful supermarkets know what is going on in ‘the hood’ and do something in return for their neighbourhoods. You can’t spend your time on your assortment and your communication alone; you also should connect to schools, sports clubs and neighbourhood guest houses. This could cause problems for Albert Heijn in due course”.

[EL: I actually don't endorse this remark by Gerard Rutte. In Almere and other cities, there are a lot of neighbourhoods where Albert Heijn (almost) holds a monopoly position. People might not like AH, but they actually don't have a choice for their last minute groceries. Their dominance is still paramount]


Rutte: “think global and act local, that is the name of the game today”. 

Ernst’s Economy in discussion at BNR Newsroom: Will 2013 be the end of the classic retail stores, as we know them? Pt I

Last Monday, 24 June 2013, I was again present at BNR Newsroom: the live radio-talkshow from BNR News Radio, with my friend and eminent anchor man Paul van Liempt.

Paul van Liempt of BNR Newsroom
Picture by: Ernst Labruyère
Click to enlarge
This week’s topic of Newsroom was the difficult situation in the Dutch retail industry and the invigorating battle between webshops and brick & mortar (B&M) stores:
  • Who will be the winners and who the losers in the retail industry, in the coming years?
  • Will the crisis cause a massacre among the old-fashioned, Dutch ‘mom & pop’ retail stores?
  • Will AH manage to keep its extremely dominant position among the supermarket chains?
  • Can the classic brick & mortar store, as we know it, survive the battle against the soaring number of webshops ? 

Paul had invited a number of figureheads from the Dutch online and B&M retail industry, in combination with some of the smartest analysts in this line of business:
  • Ronald van Zetten, CEO of the ‘Dutchest’ department store chain HEMA
  • Oger Lusink, founder of the finest men’s clothes boutiques chain ‘Oger’ in The Netherlands
  • Jeroen Hubert, marketing manager of Wehkamp.nl, a company that made a successful transition from an oldfashioned mail-order firm to a state-of-the-art multi-million online store
  • Geert-Jan Smits, formula manager of EkoPlaza, the Dutch biological food supermarket chain
  • Wil Wurtz, consultant Customer-centered Entrepreneurship of ‘Metrics & More’
  • Gerard Rutte, retail specialist and editor of online retail magazine ‘uwsupermarket.nl
  • Michel Koster, Sector Banker ‘Retail’ for food, non-food and automotive at ABN Amro 

The contrasts between Jeroen Hubert, as a successful representative of the 'online generation' and the genuine brick & mortar (B&M) retailers Oger Lusink and Ronald van Zetten made up for some informative discussions. 
In a way, it also showed the gap between the older B&M generation, who look at online shops reservedly and the fully online-minded ‘youngsters’, who think of real stores, as a kind of museum. 

Nevertheless, the most successful online and B&M stores have much in common, concerning service, customer-friendliness and a clear and decisive strategy.


Until now, 2013 turns out to be a disastrous year for the Dutch retailers, in which already 377 retail stores and store chains went bankrupt, year-to-date: an increase of 50 stores YoY.

Among those defaulted stores were high profile chains like iCenter (Apple reseller), Free Record Shop (a chain of record stores with 100+ stores) and Selexyz, a chain of mega book stores.

According to Michel Koster of ABN Amro, these soaring defaults are caused by the unfavorable mood of the consumer and a 3% drop in spending power in 2013 YoY. Consumers were severely hit by this government’s  austerity measures and the soaring costs for healthcare insurance and energy bills.


Michel Koster, sector banker Retail of ABN Amro,
Picture by: Ernst Labruyère
Click to enlarge
In the remainder of 2013, the number of defaults will accelerate. Koster predicts havoc among the ‘mom & pop’ stores: since 2008, non-food turnover dropped by 15%, while on the other hand the number of shops and available shopping space exploded. Much more people are now 'eating a much smaller pie'. The weakest shops will have 'too little to eat' to live through this survival-of-the-fittest.

According to Koster, winning stores like Hema and Action (a discounter in excess supplies and liquidation stocks of small, non-food articles and food stuffs) offer much value for money. Small ‘mom & pop’ stores must offer exceptional service and tailor-made formulas, like ‘shopping at your convenient time’, in exchange for customer loyality. Thus they can survice, in spite of their higher price-level.

Chains with a balanced mix between B&M stores and online webshop could prove to be winners in the years to come.

HEMA’s Ronald van Zetten made a frank confession that he would have preferred a Dutch shareholder above current British HEMA-owner Lion Capital: “they know my opinion and respect it”

Although by itself the country of origin didn’t matter for Van Zetten, he is convinced that a Dutch owner would have better supported HEMA’s expansion strategy. “In the past, there was a rumour about a market party, which could further profesionalise HEMA. We believed that the HEMA formula would have fitted very well to this party. A Dutch owner probably would have taken a quicker decision in this situation.”

Ronald van Zetten, CEO of HEMA
Picture by: Ernst Labruyère
Click to enlarge
And about HEMA’s eternal Dutch competitor V&D, which didn’t make a profit in 2012, while HEMA did, Van Zetten stated: “V&D’s stores and assortment are just too big and their preselection has not been adequate. It is definitely not the right mix to be successful and profitable”.

Van Zetten is glad with the arrival of Marks & Spencer, the famous English retail chain, which started opening stores in The Netherlands. With their English style and food-to-go assortment, M&S is an enrichment of the Dutch retail landscape, according to him.

HEMA is not afraid about being taken over by M&S: “we are too small for them”. Also Ahold, the Dutch multinational supermarket and retail chain will probably not take over HEMA anymore, after it tried to do so five years ago.

“First, we are not for sale at this moment and second, we are now very successful with our expansion strategy in France, Germany, Belgium and Luxemburg. Only a large party, that is willing to support our international growth strategy would be a suitable candidate to take-over HEMA, in due course”.

Van Zetten is a strong adversary of the last decade’s quick growth of shopping space; he states that only new shopping space should be built, when at least the same amount of shopping space at other locations is withdrawn from the market. 

Concerning HEMA’s online strategy, Van Zetten states that HEMA’s ideal mix is 80% brick & mortar vs 20% online. Besides from being an extra sales channel, Van Zetten sees the online store as an additional service for his B&M customers. It offers customers the possibility to deliver temporary sold-out articles directly at home, through a special terminal in the shops.

Wil Wurtz talked about customer-centered retailing: “a customer-centered retailer has two very important questions. In the morning: how can I make a difference today for my customers and shareholders?! And in the evening: “how did I actually make that difference today?”

Wil Wurtz, consultant customer-centered 
entrepreneurship of 'Metrics & More'
Picture by: Ernst Labruyère
Click to enlarge
Wurtz is annoyed by shops, like “Media Markt” (electronics and household appliances) , who register a lot of customer data, but seemingly don’t do anything with it in their marketing mix. He thinks that this data should be used to build a solid relation with their customers. This doesn’t happen yet.

On the question of Ernst’s Economy, why exactly the discount stunters and pallet sales stores do so extremely well these days, Wurtz answers: “The average customer wants three things: pleasure, comfort and benefits. Many customers, however, just target the benefits, while skipping the comfort and the pleasure in these trying times. This explains their success”.


Tomorrow, the second part in this short series 

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