C&A Europe

Retail expansion progress report

Shamini Rajaganesh

Contents

1. Introduction 2. History 3. Profile 4. Business strategy and Competitiveness 5. Retail expansion 6. Sustainability 7. Conclusion 8. References

C&A Europe
Introduction
C&A is a privately owned international chain of fashion retail clothing stores, with its European head offices in Vilvoorde , Belgium and Dsseldorf, Germany. It has fashion retail store branches across Europe, Asia, North America and Africa. Its brands include Angelo Litrico, Canda, Clockhouse, Here+There, Palomino, Westbury, Yessica, Yessica Pure, and Your Sixth Sense. C&A offers best quality fashion clothing at competitive prices, across a wide range of merchandise from high fashion items to basic clothing to meet the many different requirements of fashion consumers. It serves to contribute to the well-being of our customers, our staff, our suppliers and our partners, by observing standards of behavior that respect the individual and the collective interest. It is one of the oldest businesses in this fashion sector.

History

The Brenninkmeijer Brothers

The origins of C&A date back to 1841 when Clemens and August Brenninkmeijer, whose initials the company still bears, opened a textile warehouse in the town of Sneek in the

Netherlands. The Brenninkmeijer family had its roots in Mettingen, a small community in the
Tecklenburg area of today's northwest Germany, not far from the present border with the Netherlands, a country with which the area has strong links. Originally, Tecklenburg natives spoke a dialect of Low German with some resemblance to Dutch. Especially in the 17th century, Holland's golden age, much of the area's commerce focused on Holland's international ports and rich trading markets. The Rhine River and canals still link much of northwest Germany to the ports of Rotterdam and Amsterdam.

The first trading Brenninkmeijers left the family farm in Mettingen in 1671 to become travelling linen sellers in Holland. Even then the family was said to be secretive about their business. At this time, secrecy gave them a commercial advantage and permitted the avoidance of customs charges. In 1841, the brothers Clemens and August Brenninkmeijer abandoned the itinerant life and laid the groundwork for the C&A chain when they opened their first store in the small Dutch town of Sneek. The store pioneered sales of affordable ready-to-wear clothing. The small firm of textile sellers was very successful, and within the next few years further stores were opened in the Dutch cities of Leeuwarden, Amsterdam, Utrecht, Rotterdam, Groningen, Leiden, Haarlem, and Enschede. The company was eventually to take its name from the initials of the Brenninkmeijer brothers' first names, opening the first official C&A store in 1861. Many of Clemens and August Brenninkmeijer's descendants were active in the company throughout its history. Indeed, for a time, male members of the family, upon reaching the age of 14, were given the choice of entering the family business or joining the Catholic priesthood. Even then, family members entering the business were subjected to the family's codes of conduct and secrecy. The second Clemens Brenninkmeijer became the driving force behind the family's expansion into Germany. In 1911 he opened C&A, the family's first large German department store, in Berlin. In the next year he opened another Berlin clothing store. In 1913 new branches were opened in Hamburg and Cologne and in

1914 another store was established in Essen. World War I presented the family with few international problems, because Holland remained neutral throughout the conflict. After World War I, Germany became the major focus of expansion, despite its inflation and other economic problems. By hard work and constant travel between branches, Clemens Brenninkmeijer made a success of the German operation. By 1928, C&A had eight stores, and at the outbreak of World War II, there were 17. Clemens Brenninkmeijer's efforts at further international expansion were only partially successful. The first British store was opened in London's Oxford Street in 1922. Later in the decade, other British stores were opened in Birmingham and Liverpool. In contrast, C&A's most successful field of operations, Germany, was coming under the control of the strongly nationalist and anti-Semitic Nazi regime. The Dutch Catholic family had to come to terms with this new German government. C&A's Dutch background put its German expansion plans at risk. Nazi laws required the firm to gain government permission to open new branches. Some Nazis were also suspicious of the firm's church connections. The firm emphasized its pre-Nazi, anti-Jewish hiring policies and the family's distant German origins. In a 1937 application to open a store in Leipzig, the board asked for assistance from Hermann Gring, the author of the state economic plan, and successfully argued that it had struggled against Jewish-owned business and prohibited the employment of Jews in the past, writing that the family had 'penetrated the power held by the Jewish textile industry.' 1 The booming economic climate of the 1960s stores encouraged C&A to spread its name beyond Holland, England, and Germany. The company opened its first Belgian store in 1963, later building a network of 37 stores in that country by century's end. As the Brenninkmeijers came under pressure from German authorities to publish their company's financial information, Belgium was to become still more important to the company as the city of

Vilvoorde was chosen for the site of its headquarters. C&A was also looking to expand into the U.S. market. In 1963 the company fulfilled that long-cherished dream with the acquisition of seven Nathan Ohrbach retail stores. Throughout the postwar period, secrecy remained a pillar of C&A corporate policy. Important members of the Brenninkmeijer family on the governing board were hardly known outside of Europe's financial circles. When any of C&A's management was quoted in the press, statements tended to remain limited to company sales policy, such as 'No store sells cheaper' or the most famous statement, 'We let our merchandise speak for us.' The desire for secrecy was so important that it led the firm to change its legal status again. After the German Bundestag passed new disclosure rules for the GmbH (Gesellschaften mit beschrnkter Haftung), C&A Brenninkmeijer became a KG (Kommanditgesellschaft), or limited partnership, in September 1969. The move allowed the family to withhold much of the company's financial information from the public. Secrecy seemed to insulate the company from change and criticism of other policies that appeared anachronistic. The company's paternalism and preference for hiring Catholics attracted particular criticism from the media. Recruits were required to be devout Catholics and attend mass. The rest of the week was devoted to work training and study for compulsory examinations. If managers became engaged, they were required to give the company details on the betrothed's parents and religion. Non-Catholic affianced partners were expected to convert or, in accordance with the Catholic Church's teachings, to at least agree to a Catholic ceremony and Catholic religious education for the couple's children. The company's governing board and top management positions remained dominated by members of the Brenninkmeijer family and those related to them through marriage. Meanwhile, the company's success in Belgium encouraged it to extend its stores and fashions to other European countries. In 1972, the company opened its first C&A stores in France.

These were followed by Switzerland in 1977, Luxembourg in 1982, Spain in 1983, and Austria in 1984. The company also brought its stores to Brazil, where it quickly built a leading market position. Despite its international expansion, C&A maintained centralized buying policies, helping it to reduce its costs and offer fashionable clothing at low prices. Yet, while the company was finding success in its new markets in France, the company's retail chain was to reach more than 50 stores by century's end, while Switzerland was to boast 30 retail stores of its own in the United Kingdom, C&A was entering a long, slow decline. A chief cause of its problems in that market was the company's slow reaction to the growing fashion awareness of the U.K. consumer a situation brought on in part by the family's centralized buying operations. In the 1970s and 1980s, C&A began to play catch-up in the U.K. market, attempting to reinvent itself as a seller of trendy fashions. Nonetheless, the company, which extended its chain to 110 stores throughout the United Kingdom, enjoyed a position as that market's leading retailer. C&A proved equally slow to react to the collapse of the East German regime in November 1989 and to subsequent German unification. This initial reluctance was partly its usual caution, but was also due to the need to settle property questions over pre-war store sites in Leipzig and elsewhere. After C&A's inexpensive fashions proved popular with East Germans living near the border, making a strong contribution to 1990 profits, the company required no more convincing to expand into the former East Germany. By autumn 1991, new C&A stores had opened in Guntherstadt, Chemnitz, formerly Karl Marx Stadt, and Magdeburg. There were plans to reopen a C&A on a pre-war site in Leipzig. West German expansion continued, however, with new stores planned in Lunen, Ingolstadt, Ravensburg, and Regensburg. Some expenditures and expansion plans elsewhere were reduced in order to concentrate on investment in a unified Germany.

In the 1990s, C&A continued to identify new national markets in which to establish its store. The company targeted Portugal in 1991, opening five more stores through the decade. C&A also attempted to enter Denmark in 1995, with more limited success when faced with Scandinavian rival H & M. In 1996, C&A moved to South America, opening the first of five stores in Argentina, where the company pledged to invest $2000 million. C&A also entered the Irish market in 1998. Meanwhile the company's U.K. operations were coming under increasing pressure. A wave of new competition, such as the expanding Marks & Spencer chain, New Look, Next, and many other, more fashionable clothing retailers, had knocked the steam out of the company's U.K. sales. The dominant influence of Germany on C&A's clothing fashions proved disastrous for its U.K. branch, as the two country's fashion senses appeared wholly different. By 1995, the company's U.K. operation was losing money. C&A attempted to revive its U.K. branch in 1998, announcing a 200 million investment program in upgrading its stores, coupled with the closing of a number of its poorest performers. The company also suggested that it intended to move toward a greater openness, shedding at least part of its historical secrecy. In 1997, the company had already taken a first step toward opening up to the financial world when it appointed two non-family members to its board of directors for the first time. The company, which had been juggling a portfolio of more than 20 different fashion brands, also streamlined its brands to just ten, including Clockhouse, for which the company began developing its own retail store concept. By 2001, the company had six Clockhouse stores in operation C&A's hopes to restore its U.K. operations proved to be in vain. In 2000 the company suddenly announced its intention to exit the U.K. market entirely, closing its remaining 109 stores and placing nearly 5,000 employees out of work. The last C&A store closed its doors in January 2001, ending nearly 80 years of C&A operations in the United Kingdom.

Instead, C&A turned its attention to building its name in new markets. The company began investing in Mexico, opening two stores by 1999 and announcing its intention to open as many as 30 stores in that country by 2009. C&A was also becoming interested in the growing economies of the East European countries. In 1999, the company opened its first store in the Czech Republic. Despite its growing openness, C&A remained wholly controlled by its founding Brenninkmeijer family, which ranked among the world's wealthiest families with a fortune estimated to be worth more than $5 billion. Entering the 21st century, the internationally operating company exhibited little interest in changing its private status.

Profile
C&A offers more than 10,000 different articles in 190 commodity groups. C&A has eleven exclusive brands in its portfolio: Baby Club, comfortable and high quality fashion for babies; Canda, complete range of competitively priced quality basic clothing items; Clockhouse, latest fashion addressing young adults from 18 to 25 years old; Westbury, attractive quality range of classic mens clothing; Yessica Pure, clothing for modern and fashion conscious women; and Your Sixth Sense, finest quality and classic styles for elegant women. This reflects C&As highly complex fashion portfolio and its concept of offering fashionable clothes to everyone C&A is organised into a holding structure named COFRA holding AG. C&A Europe is one of its subsidiaries. Besides its fashion retail activities, the subsidiary operates financial services named C&A Money, offering insurance and financial products to customers in Germany since 2006. In addition to C&A Europe, there are C&A Latin America and C&A China. Both are subsidiaries of COFRA Holding AG as well. Each of the organisations operates independently of one another. Besides retail activities, the holding company COFRA Holding AG encompasses a group of companies located in Europe, Asia,

North and Latin America whose activities include real estate, private equity investments and financial services. The holding structure was introduced in 2001 because of difficulties in the market. Thus, a clear and efficient holding structure was employed to quicken the decisionmaking process and to make the entire enterprise more transparent. Despite difficult economic conditions and a significant decline in the European clothing market, C&A Europe was able to generate a stable gross turnover of 6.59 EUR during the financial year 2010-11.

Business Strategy and Competitiveness

C&A is primarily a trading company and purchases its goods from around 900 suppliers located in 40 counties. The company does not manufacture any of its merchandise itself. It either purchases manufactured and ready-for-sale merchandise as passive sourcing through contract buyers or the products are produced in accordance to the C&As specifications as an active sourcing strategy. The upstream textile supply chain is organized and coordinated by the companys purchasing organization. C&A Buying. The two head offices in Brussels and Dusseldorf employ around 450 buyers, designers and stylists, working to develop and research the latest fashion trends and to buy final products for C&A. One of C&As channels to directly and actively purchase goods is through C&A Buying. Thus operates eleven buying offices in nine countries. Its employees work directly with C&A contractual partners at the local level, visiting the manufacturing facilities and ordering goods on site. The following activities are C&A Buyings key tasks: Analysis of production markets Market analysis of suppliers and production facilities Agreeing capacities and production schedules with suppliers and buyers Inspection of samples

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Checking workmanship and fit Monitoring delivery times Quality control and final acceptance Coordination of transportation logistics Customs formalities

Another method C&A employs to actively purchase its goods is through a subsidiary, the Canda OHG. This sourcing strategy can be classified as contract manufacturing because the subsidiary works with C&A designers, utilizes its production knowledge, procures fabrics and other materials and organizes the production and shipment of the goods. Canda OHG thus controls the entire up-stream textile supply chain. The manufacturing facilities with Canda OHG cooperates are mostly located in Eastern Europe and China. C&A obtains around 5% of its merchandise this way. C&A also procures goods following a passive sourcing strategy. C&A Buying purchases from approximately 500 suppliers located in Europe in the form of contract buying. These suppliers sometimes commission producers who, in turn, may employ the services of subcontractors. Through this channel C&A buys final and ready-for-sale merchandise. The company thus possesses less control of the upstream textile supply chain compared with following an active sourcing strategy.

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After procuring the merchandise, C&A transports it from the factories to its 13 distribution centres in Europe. From there goods are distributed to local retail outlets. C&A uses a variety of means for long distance transport, mainly in primary distribution. For example, 93% of manufactured goods are transported by ships, whereas only 7% are transported by plane. C&A sells its fashion without exception through its proper distribution channels, meaning that no intermediaries are involved in the distribution process. Consequently, C&A has direct market access and thus has a direct connection to the customer. Besides its equity stores, C&A has expanded into e-commerce as an additional distribution channel. An online shop in Germany was launched in 2008 after a successful test had been conducted in the Netherlands. Two new C&A online shops, France and Austria, went online in March 2011. Following the successful start-up of its online sales activities, C&A plans to roll out to other European countries in the near future. C&As 7 core CSR areas are given in the matrix below.

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Retail Expansion
The most recent store openings took place in 2005 in Russia, in 2007 in China, Turkey, Slovakia and Slovenia and in Romania, Italy and Croatia in 2009. But C&A has also closed stores to streamline its country portfolio. The company exited the Japanese market in 1993, Great Britain and Denmark in 2000, North America in 2004 and Argentina in 2009. At the beginning of 2011, C&A Europe operated in 1490 retail outlets in 19 countries, employing over 36,000 people. According to the Stores Top 250 world retailers 2011 report, C&A took the 108th rank. The following table gives the store split up across various countries in Europe.

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Sustainability
C&As suppliers all over the world are monitored by Socam. The name Socam reflects the concept Service Organisation for Compliance Audit Management and its purpose is to oversee and monitor responsible business standards in merchandise buying on behalf of the C&A retail companies, which operate in Europe. In 2003 auditing was carried out in a total of 40 countries. Visits were made to 1.572 production units: 67% of audits were conducted in the Far East and India the remainder in Europe and North Africa. Because the Far East is a significant supply market and because many of the key issues tend to be more prevalent in that part of the world, Socam also operates through a subsidiary company - Socam Services Pte. Ltd - located in Singapore. Socam has full and independent authority to monitor the standards which are defined by the C&A Code of Conduct for the Supply Merchandise. The Code of Conduct is given below.

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Conclusion
C&A puts its customer first and hence takes utmost care to satisfy the consumers wishes, needs and satisfaction and thus it intends to maintain permanent dialogue with them. For this the company uses response/feedback forms to keep themselves in line with the consumers motivation. The company utilizes this information to steadily enhance its product ranges, services and stores to continuously improve quality and raise the level of customer satisfaction. Despite the financial and economic crises of recent years, C&A was able to achieve growth as originally planned. As economies across Europe return to growth, C&A intends to accelerate its expansion in both the existing store base and its Internet business.

References
1. C&A annual report 2010 http://www.c-and-a.com/ 2. Strategic Retail Management: Text and International Cases, Joachim Zentes, Dirk Morschett, Hanna Schramm-Klein, Springer, Nov 5 2011. 3. http://en.wikipedia.org/wiki/C%26A 4. http://www.referenceforbusiness.com/history2/4/C-A.html