Department store chain Galeria Karstadt Kaufhof to change its name upon backing of US investor

Beauty products, handbags, shoes, underwear – these are to be the focal points of German department store chain Galeria Karstadt Kaufhof’s product range in future.

‘This will enable us to clearly differentiate ourselves from the competition,’ the company’s managing director, Olivier Van den Bossche, said on Tuesday. For beauty products such as perfume, the company also wants to rely on the extensive network of the new co-owner Bernd Beetz. The 73-year-old knows the industry well. Until 2012, he managed the US cosmetics group Coty for eleven years.

According to Van den Bossche, Galeria is already a central point of contact in the beauty sector alongside the Douglas perfumery chain. He also sees great potential in shoes. This is reflected in the sales. He also wants to focus on fashion, home and leisure. This segment is a key sales and earnings driver. The proportion of concessions and consignment in the shops is to be increased. In this type of model, brands operate a specific area under the Galeria umbrella, sometimes with their own staff. The department store chain does not have any inventory risk or expenses for logistics or orders.

Numerous shops are to be converted and modernised. According to Denkhaus, the new owners have earmarked considerable financial resources for this. He did not want to disclose any figures. At the beginning of April, it was announced that a consortium consisting of the US investment company NRDC and the investment company BB Kapital SA, owned by entrepreneur Bernd Beetz, intends to take over Galeria. The new owners have so far declined to comment on the future concept or the total amount of the planned investment.
Expert: Investment required of more than one billion euros
Retail expert Carsten Kortum sees a considerable investment backlog at Galeria. The erosion, i.e. the gradual deterioration of the condition of the properties, many of which date back to the 1950s and 1960s, has persisted for decades in some cases.

‘The result is also clearly visible to customers in the older shops,’ the professor from the Baden-Württemberg Cooperative State University in Heilbronn said. Only ten department stores have been modernised so far. For the remaining 66, Kortum estimates the investment requirement at an average of 20 million euros per shop and more than one billion in total.

‘The investments in operating equipment such as shop fitting, product presentation, building services and catering are the responsibility of Galeria, while the landlords also have to invest in the properties,’ Kortum said. However, he does not consider the department stores’ to be an obsolete model. He cites fashion retailer Breuninger and the US department stores chain Macys as positive examples. The latter is so popular that investors are prepared to pay the equivalent of more than 6.1 billion euros (about 6.6 billion dollars) for the company.
‘Customers don’t need thousands of skirts’
Kai Hudetz, managing director of the Cologne-based retail research institute IFH, poses a fundamental question: Why do we even need traditional department stores when Amazon exists? Nevertheless, Hudetz is certain that Galeria can play to its strengths here – by focussing on relevant products. ‘Customers don’t need thousands of skirts, they need the right one, they don’t need hundreds of suitcases, they need the right one.’

He sees good opportunities for brick and mortar retailers, particularly in terms of advice and service. Investments in good staff are therefore just as necessary as in the online channel. ‘If Breuninger generates more than half of its sales online and Galeria less than ten per cent, that speaks for itself,’ Hudetz said. It is questionable how important the online business is to the new owners. Beetz told German TV channel ZDF in April: “I’m not a big fan of the online business. We believe in the department stores. We believe in the visual presentation of brands, in making them tangible.”

German insolvency administrator Denkhaus recently submitted an insolvency plan to the Essen district court. This also stipulates the planned takeover by the new owners. However, the agreement concluded between them and the retail group will only come into effect if the creditors accept the insolvency plan on May 28 and it is subsequently confirmed again by the court. Denkhaus intends to hand over the company to its new owners by the end of July.(Dpa)

This article was originally published on FashionUnited.DE. Translation and edit from German into English by Veerle Versteeg.