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”.