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
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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