Retail Comp 2012

PAGE 234 QUALITY ASSURANCE
IN RETAIL
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PAGE 250 BRANDS FOR EVERY
CUSTOMER
PAGE 266 SALES FORMATS:
MOVING WITH THE TIMES
KASSE
PAGE 286 MULTICHANNEL RETAIL
4. SPECIAL TOPIC
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QUALITY ASSURANCE IN RETAIL
METRO RETAIL COMPENDIUM 2011/2012
234
ONLY THE VERY BEST QUALITY
FOR THE CUSTOMER
Retail is an indispensable part of everyday life. As the interface between
the consumer goods industry and the end customers, the retail sec-
tor helps to guarantee a supply of products for billions of consumers
around the globe. This involves a high degree of responsibility, since
goods that go on sale must be of impeccable quality. In order to ensure
this, the retail sector makes use of effective quality assurance systems
along the entire supply chain.
SPECIAL TOPIC
METRO AG 2011
235
A fresh breeze blows along the
coastal strip. Small waves ripple
through the water. The air is
cool. Men in boats are sailing out
to sea, headed for large round
cages made of wire. Here in
Norway, Bremnes Seashore op-
erates one of the worlds best-
known salmon farms. The Scandi navians are renowned for their
sustainable fish farming methods. The fish live in conditions that are
very similar to their natural habitat. The sea cages reach down to
depths of up to 50 metres. The stocking density is only half the level
permitted by law, and the use of antibiotics for breeding purposes is
strictly forbidden. In addition, a pa tented cold fish slaughtering sys-
tem, which reduces their body temperature to two degrees Celsius,
minimises the stress for the salmon before and during the slaughter-
ing process.
Customers want to know where products
come from and what happened to them
en route to the store shelf.
236
Fresh fish
from sustainable
sources
SPECIAL TOPIC
METRO AG 2011
237
Although Bremnes Seashore itself has no direct contact with con-
sumers, its exemplary approach to breeding is important for salmon
retailing because shoppers wish to know where products come
from and what happened to them en route to the store shelf. Par-
ticularly in the wake of recent food crises, there are constant calls
from consumer protection organisations and the German government
for extensive quality assurance and controls at all stages from pro-
duction to point of sale. And as the interface between suppliers and
the consumer goods industry on the one hand and consumers on the
other, the retail sector has a particular duty to ensure effective qual-
ity assurance for the products being sold. This constitutes an enor-
mous challenge given the vast flow of goods around the globe, includ-
ing highly sensitive products such as fish.
238
Delicious salmon from Norway
The highly complex system of quality assurance and control is il-
lustrated to great effect by Bremnes Seashore and its farmed sal mon.
METRO GROUP is among the clientele of the Norwegian fish farm,
and its sales brand Metro Cash & Carry sources all the fresh sal mon
for its German and Austrian customers here. Every year, the whole-
sale company receives some 3,000 tonnes of fish from Bremnes
Seashore. To ensure that the goods remain perfectly fresh during the
more than 1,000-kilometre-long transport route, METRO GROUP has
established its own quality assurance systems. With the aid of intern-
al controls, tests by independent institutes, state-of-the-art technol-
ogy and qualified personnel, the Group keeps quality standards
SPECIAL TOPIC
METRO AG 2011
239
240
consistently high. The inspection
process begins before a busi-
ness partnership is entered into
in the first place. METRO GROUP
sup pliers including Bremnes
Seashore must comply with
the internationally recognised
standards for food safety, envir onmental protection and hygiene set
out by the Global Food Safety Initiative (GFSI). More than 400 com panies
from the food sector belong to this initiative.
48 hours from source to shelf
In the case of fish logistics, ensuring food safety is especially com-
plicated given the perishable nature of the products in question. For
METRO GROUP employees, this means that the Bremnes Seashore
salmon must be transported to Germany as quickly as possible. At
the same time, quality and hygiene controls must not be compromised
in any way. The key factor here is that the cold chain from the
salmon farm to the store shelf is maintained at all times. The tem-
The Global Food Safety Initiative (GFSI)
sets out internationally recognised safety
standards for food producers.
SPECIAL TOPIC
METRO AG 2011
241
perature may not rise above two degrees Celsius at any stage.
Because of this, the freshly slaughtered salmon are loaded directly
onto large refrigerated trucks. With the fresh cargo safely on board,
the transporters make their way to Germany to the fish logistics
centre of METRO GROUP Logistics in Gro-Gerau, near Frankfurt on
the Main. Once arrived, the sensitive goods are inspected directly
specially trained employees are at hand to verify that temperature,
firmness, appearance, smell, weight, labelling and slaughter data
are all correct. They also take samples that are regularly sent to a
specialist laboratory for further checks. If the fish pass the tests, the
242
logistics centre employees order-pick them for the individual whole-
sale stores. Shortly afterwards, they will have repacked the sensitive
Norwegian products for further transport. The refrigerated trucks
reach the German wholesale stores an average of five hours later.
The goods then undergo another quality check: the wholesale store
employees inspect the salmon again carefully before putting them
on display for customers on a bed of crushed ice.
The entire process from loading the fish in Norway to the final
delivery at the German wholesale stores takes just 48 hours.
SPECIAL TOPIC
METRO AG 2011
243
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Monitoring from A to Z
This is just one example of what quality assurance means in practical
terms. According to the German Food Hygiene Regulation (LMHV),
any company that produces, processes or sells foodstuffs must
systematically determine, monitor and document the steps in the
entire supply chain that are re-
quired for ensuring food safety.
As well as this, appropriate
safety measures must be spe-
cified. Most company hygiene
controls are carried out in ac-
cordance with the Hazard Ana-
lysis and Critical Control Points
(HACCP) concept.
Any company that sells foodstuffs
must systematically determine, monitor and
document the steps that are required for
ensuring food safety.
SPECIAL TOPIC
METRO AG 2011
245
It all started with NASA
The HACCP concept was originally developed for NASA. In 1959, the
US space agency commissioned The Pillsbury Company with the task
of producing food for astronauts that would be suitable for consump-
tion in outer space and that would be 100 percent safe. In order to
meet these requirements, Pillsbury adapted a method used by the
military to eliminate weak points and developed this for the pur-
poses of food safety. The HACCP concept was created and became
widely accepted over time. For instance, the Codex Alimentarius
published by the Food and Agriculture Organization of the United
Nations (FAO) has recommended the application of the HACCP con-
cept since 1993. The concept was established in German law for the
first time with the German Food Hygiene Regulation of 1998, as part
of the implementation of the EU Hygiene of Foodstuffs Directive of
1993. It is also included in the EU hygiene regulations of 1 January
2006, which stipulate that only foodstuffs complying with HACCP
standards may be sold in and imported into EU countries. Since then,
companies that are active in the food sector have had to document
their adherence to the HACCP concept. This involves a detailed re-
cording of the key steps for ensuring food safety that they have iden-
tified, how these are monitored and what form their quality controls
and hygiene measures take.
246 QUALITY ASSURANCE IN RETAIL
Systems, initiatives, standards and seals
In addition, there is a wide range of other systems, initiatives, stand-
ards and seals for ensuring quality in retailing. In the Global Food
Safety Initiative, sector players have joined forces to develop inter-
nationally valid safety standards for food. The GLOBALGAP standard
specifies uniform minimum re-
quirements for agricultural pro-
ducers with regard to produc-
tion safet y and methods,
occupational safety, environ-
mental protection and hygiene.
The Marine Stewardship Council
established the first internation-
ally recognised environmental
standard for sustainable fishing
and is continually expanding it.
In order to ensure that adequate
measures can be taken in the
event of a crisis, traceability of the origin of goods is also mandatory.
The retail sector already guarantees this today, meaning that com-
panies are able to identify and eliminate problems quickly and se-
curely. The use of modern technology can continue to help signifi-
cantly improve the traceability of food in the supply chain, says
METRO GROUP CIO Sylvester Macho, who is responsible for the
Companys IT structure.
In order to ensure even greater transparency and food safety, the
Company calls for a new form of product labelling known as the
Serialized Global Trade Item Number (SGTIN). At present, products
worldwide are still tagged with the Global Trade Item Number (GTIN).
This identification number allows specific information about products
for instance price or colour to be assigned directly. This in turn
There is a wide range of systems,
initiatives, standards and seals for
ensuring quality in retailing.
SPECIAL TOPIC
METRO AG 2011
247
makes it possible to label standardised articles and services clearly
in the flow of goods between companies. If a serial number were
added to the GTIN, it would be possible to identify the exact product.
By means of an additional RFID chip, permitting the goods to be
identified and localised automatically, it would then even be possible
to map a products route within the entire supply chain. This means
that retailers would be able to track which individual articles of a
particular product type can be found in which outlet. As Sylvester
Macho emphasises: In the event of a food crisis, this information
would be invaluable for industry, retailers and regulatory bodies
alike. This is because it would allow retailers to identify the exact
products that constitute a risk and to remove them from sale without
delay. And thanks to the seamless batch traceability of goods that
this allows, it would also be possible to solve potential problems even
more efficiently.
QUALITY ASSURANCE IN RETAIL 248
Blauer Engel (Blue Angel)
Seal for environmentally friendly products and services
BRC Consumer Products
Internationally recognised quality standard of the British Retail
Consortium (BRC) for nonfood products. The aim of the standard is
to guarantee product safety, compliance with legal requirements
and optimisation of product quality.
CE marking (without identification number)
With this marking, the manufacturer confirms that the product complies
with the product specific EU directives. However, the CE logo alone does
not indicate whether compliance with these directives has been verified by
independent bodies.
FSC
This seal for wooden products conrms that the wood was not sourced
through uncontrolled deforestation and that due respect was afforded to
human rights and the environment.
ISO certification
Seal for quality management
LGA
tested
LGA certificate
Seal for products whose mechanical, chemical and physical properties do
not pose a risk to health or hygiene
Confidence in Textiles
Seal for textiles that have been tested for harmful substances
EXAMPLES OF QUALITY SEALS IN THE NONFOOD AREA
SPECIAL TOPIC
METRO AG 2011
249
Cookies
Cookies
Cookies
Cookies
Cookies
Cookies
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BRANDS FOR EVERY CUSTOMER
250
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CHIPS CHIPS
CHIPS
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TAILOR-MADE: BRANDS
FOR EVERY CUSTOMER
What would Cola be without Coca, glue sticks without Pritt, and
tissues without Kleenex? Popular brands have always played an
important role in retail. They guide consumers and act as quality
benchmarks. Over the last ten years, however, retailers private
labels have also rapidly gained in importance.
SPECIAL TOPIC
METRO AG 2011
251
In the next few months, the Media
Markt and Saturn consumer
electronics stores will roll out
the PEAQ brand for consumer
electronics and PCs in the upper
price segment and ISY for ac-
cessories. This will complete
their range of exclusive brands. The METRO GROUP sales division
launched its first two attractive own brands in 2010: KOENIC for
high-quality small and large domestic appliances and ok. for entry-
level products. They soon proved successful: many KOENIC and ok.
products sold out soon after they hit the shelves and had to be quickly
restocked.
Retailers private labels
are becoming increasingly
popular in the sector.
252
Names associated
with quality
SPECIAL TOPIC
METRO AG 2011
253 BRANDS FOR EVERY CUSTOMER
Media-Saturn is pursuing a rigorous strategy of exclusive brands: right
from the start, the four brands PEAQ, ISY, KOENIC and ok. were
developed to cater for customers needs. The objective is to extend the
product portfolio so as to offer consumers looking for high-quality,
electronic products at attractive prices everything they want. But that
is not all: Media-Saturn expects the new brands to achieve even more
than this. Private labels are associated with better margins, stronger
customer retention, a sharper profile vis--vis the competition and an
optimised price structure. They also offer customers greater variety
in what is an increasingly concentrated market. Media-Saturn hopes
to profit from this and grow the share of total sales accounted for by
own brands to five percent in the first seven to eight years. With this
strategy, the consumer electronics stores are following a current trend.
Unlike producers brands such as Coca-Cola and Nescaf, retailers
private labels are becoming increasingly popular in the sector. Since
2001, the share of total sales in the German retail industry accounted
for by private labels has incresed from 27 to 34 percent.
Reals own brands something for everyone
Premium quality for connoisseurs
Certified organic quality at a healthy price
Brand quality that always costs less
Everything for everyday needs
254
Profitable on several counts
Private labels promise numerous advantages for retail companies in
particular. Take margins, for example: because retailers can influence
the products, the associated costs and the manufacturing processes,
private labels offer a more favourable relationship between purchase
and retail prices than producers brands, meaning the profit margin is
higher. Retail companies can pass this advantage on to their custom-
ers and operate more profitably
at the same time. An attractive
range of private labels also
allows retailers to set them-
selves apart from the competi-
tion because these products
cannot be purchased anywhere
else. Strong private labels can be used to positively position a corporate
brand, as shown for example by the drugstore chain dm, which offers
the well-known and successful private labels Balea, Babylove,
Denk mit and Alverde. All four product lines are among the
15 strongest private labels in the German retail sector according to
the 2010 Retailbarometer produced by the marketing and sales
consultancy Batten & Company.
Private labels also enable companies to capitalise on product trends
faster and thus communicate messages at the same time. They do not
need to wait until manufacturers of branded goods bring out sustain-
Private labels enable companies to
capitalise on product trends faster and
communicate messages at the same time.
SPECIAL TOPIC
METRO AG 2011
THE 15 STRONGEST PRIVATE LABELS IN THE GERMAN RETAIL SECTOR
1. ja!
2. Gut und Gnstig
3. TiP
4. Balea
5. K-Classic
6. Rewe
7. real,- QUALITY
8. Babylove
9. Schlecker AS
10. Milbona
11. Denk mit
12. A&P
13. Linessa
14. Alverde
15. BioBio
Brand strength on a scale from 0 to 10
Source: Batten & Company 2010 Retail Barometer
5.8
5.7
5.4
5.1
4.9
4.2
3.8
3.6 3.6
4.4
3.8
3.7
3.6 3.6
3.5
1. 2. 3. 4. 5. 7. 9. 11. 13. 6. 8. 10. 12. 14. 15.
able products, for example; they can roll out such items themselves.
For instance, both Rewe and Real stock ecologically sustainable own-
brand products by the names of Rewe Bio and real,- BIO. Meanwhile,
Coop has incorporated fair-trade textiles into its range with Naturaline,
one of its private labels.
On top of all this, retailers can tailor private labels precisely to their
customer groups needs. This is illustrated by an example from Metro
Cash & Carry, whose customers are primarily business owners, es-
pecially hoteliers, restaurateurs and caterers. In some cases, their
product requirements differ vastly from consumers. Metro Cash & Carry
has responded to this with its own brand H-Line, for instance, which
is aimed directly at hotels and guest houses. This range includes every-
thing from miniature packs of shower gel and individual portions of
coffee cream to cooks uniforms just the kind of products hoteliers
need every day for their business.
256
New source of income
However, the rise of private labels is not good news for everyone. It
poses challenges for big-name manufacturers of branded goods. The
frozen food specialist Frosta has reacted to this trend by producing
private labels on behalf of discount supermarkets via a subsidiary. So
as to avoid competing with itself, the recipes for the private-label
products are tailored specifically to the requirements of discounters
customers and are not the same as those used for the core Frosta
brand. This strategy has the advantage of enabling the brand manu-
SPECIAL TOPIC
METRO AG 2011
257
facturer to establish an additional source of income and profit from
the trend towards private labels at least to some extent.
Experts are confident that private labels will continue to go from
strength to strength. The latest studies support this view. For instance,
a 2010 survey conducted by Ipsos Marketing in 23 countries shows that
consumers now hardly perceive any differences between private labels
and producers brands. It suggests that private labels are often per-
ceived as being as good as or even better than big names. 90 percent
of respondents were particularly impressed by the value for money
they offered. 73 percent also stated that private labels offered high
quality, while 69 percent rated them for innovativeness. The 2010
HandelsMonitor (retail monitor) produced by the industry publication
2008 2010
30% 37%
I prefer private labels to producers brands
47% 53%
Private labels offer high quality
17% 23%
Private labels are more credible than branded goods
THE CHANGING IMAGE OF PRIVATE LABELS
Source: 2010 HandelsMonitor
258
Lebensmittel Zeitung (newspaper for the retail industry in Germany)
and the market research institute Dialego reached similar findings:
37 percent of the survey respondents said that they preferred private
labels to producers brands. Two years earlier, the figure was just
30 percent. These results also reflect a change in private-label strategy
over time.
Highly differentiated range
Private labels have been around for a long time. For example, Galeria
Kaufhof launched the brand Webmeister back in 1933 as a label for
various woven fabrics. In 1961, this was followed by Lady Astor for
womenswear. Silvretta was added in 1978 as a brand for entry-level
sports products.
Up to just a few years ago, private labels concentrated primarily on
the entry-level price segment. This has now changed, however. Many
retailers private-label portfolios have become increasingly differ-
entiated as time has gone by. As well as entry-level pricing, these
ranges now offer middle-of-the-range and premium products. They
are supplemented by product lines catering for specific market seg-
ments, such as the organic own-brand products which can now be
found on supermarket shelves. Similarly, the Edeka Group is catering
for interest in regional produce with Unsere Heimat.
SPECIAL TOPIC
METRO AG 2011
259
The power of brands
Companies use brands because they exert appeal. Consumers remain
loyal to their brands because they stand for specific quality charac-
teristics and a positive image. In the light of increasingly tough com-
petition and the growing flood of information and advertising, branding
is not just relevant for products it is also important for companies.
Here too, the aim is to establish a unique selling proposition, enhance
emotional appeal, strengthen customer retention and boost customer
loyalty.
Awareness of Media Markt and
Saturn, for example, is nearly 100
percent: almost everyone in Ger-
many is familiar with the stores.
The names stand for good qual-
ity, attractive prices and exten-
sive services.
There are plenty of other examples of successful corporate brand
communications. Every year, the agency Millward Browns BrandZ
study identifies the most valuable global brands. The 2011 ranking
Brands boost customer loyality:
they create a unique selling point, an image.
This does not only apply at product level
companies also benet from a strong name.
260
1. Apple
2. Google
3. IBM
4. McDonalds
5. Microsoft
6. Coca-Cola
7. at&t
8. Marlboro
9. China Mobile
10. GE
Source: BrandZ 2011
THE MOST VALUABLE GLOBAL BRANDS
153
1.
111
2.
101
3.
81
4.
78
5.
70
7.
57
9.
74
6.
68
8.
50
10.
in $ billion
SPECIAL TOPIC
METRO AG 2011
includes popular names such as Google, IBM, McDonalds and
Microsoft. Apple is right at the top of the list: the companys deceased
former chief executive Steve Jobs and his team have succeeded in
branding Apple as both an innovator and the epitome of a young, fresh
way of life with products such as the iPod, iPad and iPhone. The 2011
BrandZ study puts the brand value of Apple at 153 billion US dollars,
making it the worlds most valuable brand. This also means that the
brand is worth far more than the 65 billion US dollars of sales gener-
ated by the company in 2010.
Major retail and wholesale companies have also adopted a strategy
to establish themselves as internationally successful brands.
METRO GROUP, for example, is one of the worlds largest companies
in the industry. The retail and wholesale group underlines this position
with proactive umbrella brand
communications. A campaign
launched in 2011 with the tagline
Made to trade. emphasises the
Companys performance and
economic importance. At the
same time, it documents the
Groups diversity with its sales
brands Metro Cash & Carry, Real,
Media Markt, Saturn and Galeria
Kaufhof. These benefit from the
strong umbrella brand, which
encourages the Company and its
sales divisions to maintain dialogue with all stakeholder groups. Con-
versely, the um brella brand draws its strength from high consumer
awareness of the sales divisions. In this way, the retail and wholesale
company positions itself within its competitive environment and shows
that it fulfils an important role both as an employer and as an eco-
nomic player with its workforce of around 280,000 people at over 2,100
locations in 33 countries around the world.
Retail and wholesale companies
have also adopted a strategy to establish
themselves as internationally
successful brands.
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TRANSLATION
EVEN OUR SUSTAINABILITY
IS SUSTAINABLE
SPECIAL TOPIC
METRO AG 2011
263 BRANDS FOR EVERY CUSTOMER 263
Mr Kirsch, more and more retailers are launching private labels why?
Because they want to offer their customers a distinctive product range to
differentiate themselves more clearly from their competitors. In our seg-
ment, we are also seeing an increasing concentration of premium-brand
manufacturers while the competition below this level is decreasing. We
can counteract this with our own exclusive brands.
To what extent do private labels help retain customers?
They are very important but only if you get it right. The number one
priority is to gain customers trust. And that only works if private labels
keep their promises 100 percent as regards price, performance and
quality.
Wolfgang Kirsch, Managing Director and Chief
Procurement Ofcer (CPO) of Media-Saturn-Holding,
discusses the trend towards own brands
More choice, better quality and
lower prices
SPECIAL TOPIC
METRO AG 2011
What is important to remember when launching private labels?
Customers have to understand the brands benefits. We worked with top
international producers to make sure this was the case. During the prod-
uct development stage, we also incorporated ideas from all the countries
we operate in. It is also important to thoroughly examine the market situ-
ation and customer needs beforehand. If your plans fail to take these
factors into account, even the best brand will flop.
There are now private labels in the premium and middle-of-the-range segments as well
as for organic produce. Where is there still potential?
That depends on the retailer and the sector. At Media Markt and Saturn,
we deliberately decided to launch brands at different price points and in
various product segments. Over the last few months, they have been even
more successful than we anticipated proof that we are giving customers
what they want.
The premium segment is still dominated by producers brands. How can private labels
succeed in this market?
Its simple: offer your customers premium-brand quality and service at a
much lower price.
Do producers brands have a future?
Definitely. We dont intend to drive them out of the market; we want to keep
offering products from all kinds of brands and manufacturers. They also
benefit from our constant expansion, which opens up new sales markets
for them. We must not forget that innovations and new technologies are still
initially established by premium brands. However, we will react quickly to
new developments with our exclusive brands, which will stimulate compe-
tition. Ultimately, it is the customer who benefits: from more choice, high-
er quality and lower prices.
SALES FORMATS: MOVING WITH THE TIMES 266
SALES FORMATS:
MOVING WITH THE TIMES
Socio-economic developments such as demographic change and
altered consumer and leisure behaviour present retail companies with
new tasks. On the highly competitive markets, they are faced not only
with the challenge of having to operate at maximum efficiency but also
of constantly developing their concepts to adapt to changing customer
demands. Innovation is more important now than it has ever been
before. Retail companies use new and reinterpreted formats to win
the favour of customers. New retailing models are developed, loca-
tions are changed and consequently innovative concepts arise.
SPECIAL TOPIC
METRO AG 2011
A coffee to go from the bakery
on the way to work, at lunch a
sandwich and a fresh fruit salad
from the convenience store in
the pedestrian zone, and later, in
the evening, a big shop at the
local hypermarket: in todays
saturated markets, consumers have numerous options for making
purchases. The retail segment boasts more retailing models than any
other economic sector. Faced with changing economic and social
conditions, the retail landscape has developed at an astonishing pace
over the last few decades. Key formative factors in this development
have been high market concentration coupled with the dying out of
smaller specialty shops, on the one hand, as well as increasing seg-
mentation due to new retailing models and concepts on the other.

The retail segment boasts more retailing
models than any other economic sector.
Sales formats in a
changing world
SPECIAL TOPIC
METRO AG 2011
269 SALES FORMATS: MOVING WITH THE TIMES
270 270 SALES FORMATS: MOVING WITH THE TIMES
Up until the 1950s, Germanys
retail landscape was more or
less dominated by three retailing
models: classic specialty shops,
department stores and mail-
order retail shared the market.
The establishment of the first
discount stores marked the beginning of a fundamental change. In
1946, the brothers Karl and Theo Albrecht took over their mothers
food store, a conventional corner shop with a selling space about the
size of a standard living room. Over the next few decades, this business
grew from its humble beginnings into one of the worlds largest retail
companies: Aldi. In the beginning, the Albrecht brothers shops were
still fairly traditional. But after a short while, the two entrepreneurs
changed their strategy and opted for significantly reduced product
mixes, discounts and plain store designs. This marked the birth of the
German discount store.

The concept of discount stores opts for
signicantly reduced product mixes,
discounts and plain store designs.
SPECIAL TOPIC
METRO AG 2011
Discount, a successful concept
The success of this sales format is based on a number of factors: a
manageable product range initially about 250, today around 800 to
1,000 articles and purchasing in bulk allowed for low prices. At the
same time, the high quality of the products also served to reinforce
the consumers trust in the discounters. A plain store design, a stream-
lined and decentralised organisation as well as a high level of store
standardisation were, at the end of the day, all key factors for rapid
growth. Between 1996 and 2006, food and nonfood discounters man-
aged to nearly double their market share in Germany and the number
of discount stores grew from 20,000 to around 30,000. Traditional
supermarkets felt the pressure from this new competition particu-
larly keenly. In just five years, between 2004 and 2009, supermarkets
lost more than 40 percent of their market share.
DEVELOPMENT OF FMCG SALES IN 2010 COMPARED TO 2005 IN PERCENT
MARKET SHARE AND SALES TRENDS FOR FOOD RETAILING MODELS 2010
10.9%
Large supermarkets
(400 999 sqm)
3.7%
Small supermarkets
(100 399 sqm)
15.7%
Small superstores
(1,000 2,499 sqm)
28.3%
Hypermarkets/
large superstores (> 2,500 sqm)
Hypermarkets/large superstores (> 2,500 sqm) 11.8
Small superstores (1,000 2,499 sqm 18.6
5.9 Large supermarkets (400 999 sqm)
32.8 Small supermarkets (100 399 sqm)
Discounters 18.8
Food retailing models in total 10.5
Source: The Nielsen Company
41.3%
Discounters
SPECIAL TOPIC
METRO AG 2011
Consolidation and competitive pressure
Nowadays, discount stores constitute one of the most important retail-
ing models in the German retail landscape with a market share of
around 41 percent. Small superstores and supermarkets together just
represent around 30 percent. However, according to experts, the time
of the great expansion is over for the discounters in Germany. After
years of practically unbridled growth, the retailing model is undergo-
ing a tangible process of consolidation. Pressure is growing on the
low-price specialists, and ironically it is originating from the super-
markets, which are joining the price war primarily with their private
labels. This development is reflected in the sales figures: a recent study
by the GfK Group showed that in 2010 discounters increased their
revenue by a mere 1.3 percent, while classic supermarkets registered
growth of 2.4 percent.
A shopping experience for demanding customers
The rise of the discounter format is not just symptomatic of the highly
dynamic nature of the retail landscape. It also demonstrates the high
level of interaction between individual formats whose operators spur
each other on in the development of new concepts. This phenomenon
can be seen not only in the discounter segment but also at the other
end of the consumer spectrum. Here, since the 1980s, customer de-
mand has been tending towards a closer connection between shopping
and entertainment and this has had a major influence on developments.
Department stores were among the first formats to orient themselves
to this demand. The principle of everything under one roof combined
with an appealing presentation of goods and a sophisticated atmosphere
has allowed these stores unlike competitors such as specialty shops
to offer their customers a special shopping experience.
SPECIAL TOPIC
METRO AG 2011
Everything under one roof
Competition for the traditional department stores arose when modern
shopping centres entered the market. These were first introduced in
the United States in the mid-20th century and have been a fixture in
the European retail landscape since the 1970s. Their worldwide suc-
cess can be put down to a number of factors. Demographic changes
are as much a part of it as increasing mobility and the changing rela-
tionship between work and leisure. Shopping centres are one answer
to these developments and the associated increase in demand for
convenience from the side of consumers.
Following these trends, the concept behind shopping centres is to unite
shopping offerings, catering and leisure activities under a single roof.
They invite shoppers to all-day stays, convey a sense of urban life and
create artificial centres where
organically grown centres are
missing. But shopping centres
are not the only strong competi-
tors for the classic department
stores. The booming discounters
and the rise in Internet trade
have also intensified competition.
This has led to the market share
for department stores falling to
less than 4 percent. In the 1970s, it was almost 15 percent. The insolv-
ency of Hertie and the crises of companies like Karstadt show that the
department store needs to change if it intends to survive as a retail
format.
The challenge of constantly reinventing itself is something that Galeria
Kaufhof has met by introducing a successful trading-up strategy. The
multi-specialists goal is to position itself as an unmistakeable and strong
lifestyle brand within the retail sector. To this end, the METRO GROUP
Shopping centres invite shoppers to
all-day stays, convey a sense of urban life
and create articial centres.
sales division has implemented a number of measures, such as develop-
ing its assortments by introducing additional international and own
brands in the middle to high price range and expanding the brand mix
of its offering. The local alignment of its stores is another factor. To
ensure that the department stores are in a position to adapt to the
specific circumstances at a location, store teams are given greater
leeway to adjust their assortments accordingly. A good example of this
orientation to local requirements is the U.Style Fashion store concept
by Galeria Kaufhof in Munich to cater specifically to the needs of 15- to
25-year-old customers.
SPECIAL TOPIC
METRO AG 2011
Differentiation, not displacement
The continuous process of change in social and consumer trends has
provided enormous impetus for the development and differentiation of
retailing models. At the same time, it has also become apparent that
the rise of new formats does not
necessarily lead to the extinction
of older, established forms. Ra-
ther, todays retail landscape is
characterised by the coexistence
of a rich variety of formats start-
ing with supermarkets, discount-
ers and hypermarkets, taking in
department stores, mail-order retail and factory outlets, and moving
on to concept stores as well as drugstores and pet supplies stores.
The question as to what customers want and how the market is likely
to develop in future is something that every retailer has to examine
closely. While retail companies are, on the one hand, looking to mod-
ernise established formats by adding innovative selling concepts, new
formats are also constantly arising.
Todays retail landscape is characterised by
the coexistence of a rich variety of formats.
SPECIAL TOPIC
METRO AG 2011
Vertically successful
In nonfood retail, for example, it is possible to observe a trend towards
vertical integration. This term is used to describe the process in which
a company becomes involved at several stages along the supply chain.
A company can be considered to be verticalised when it combines at
least two self-contained value creation stages for instance, goods
production and distribution. Companies that are already following this
strategy include Zara, H&M and Esprit. The verticalised business
model offers a number of benefits. By integrating supply chain stages,
businesses retain margins that would otherwise be lost to suppliers,
intermediaries or even in retail sales. Vertically integrated companies
can make use of this to cut prices and thus create a competitive ad-
vantage. In addition to this, it also helps to prevent, or at least reduce,
shortfalls and gaps on the shelves. Companies in the fast-moving
fashion sector, in particular, profit from the shorter product cycles,
which allow the development of more collections in a shorter time.
SPECIAL TOPIC
METRO AG 2011
In the exploration phase: convenience formats
Easier, faster, less stressful shopping for discerning, modern custom-
ers that is what characterises the convenience trend in food retailing.
All over Europe, retail companies are testing new formats. And they are
providing existing impulse buying channels such as petrol stations,
kiosks and bakeries with some stiff competition. The shops have names
like Rewe to go, Billa Box, Auchan 2 pas or Migrolino, and can
now be found in numerous European cities. What they all have in com-
mon is a relatively small selling space of around 100 square metres,
locations with a high amount of passing trade mostly in city centres
and a compact product range of ready-to-eat items. These include
fresh-baked products, sandwiches, salads, smoothies or coffee. With
this product mix, the convenience shops appeal particularly to mobile
customers who spend little time shopping, such as professionals, couples
without children, single people and commuters.
SPECIAL TOPIC
METRO AG 2011
284 284 SALES FORMATS: MOVING WITH THE TIMES
Fast, convenient and easily accessible
There are a number of reasons for the rise in convenience shopping.
All over Europe, the number of single-person households is growing;
fewer people live in large families a development that is likely to
intensify as a result of demographic change. In addition to this, the
boundaries between work and leisure are becoming ever fuzzier. Lack
of time due to longer and irregular working hours is encouraging the
trend towards quick shopping excursions in stores with smaller prod-
uct mixes. Another reason is the development towards eating on the
move. Mobile eating and snacks as a substitute for proper meals
are becoming a part of everyday life for many people, according to a
recent study by the consumer goods producer Nestl. Boosted by
these trends, the convenience segment is continuing to gain ground.
So far, however, it is still in the exploration phase, believe experts.
There is still no viable multiplicable concept. What is not in question,
however, is the segments potential. Full-range providers have also
recognised this and are starting to develop their own supplementary
convenience concepts.
Focus and service orientation
In the cash & carry segment, too, compact store formats in central
locations are playing an increasingly important role. The key focuses
here are on customer and service orientation. A good example of this
is the store format METRO for HORECA, which METRO GROUP intro-
duced with its sales division Metro Cash & Carry in Shanghai. The
product mix in the 2,000-square-metre store is tailored exclusively to
the needs of hotels, restaurants and caterers. The city centre location
also saves customers from having to make long journeys to out-of-town
stores and also attracts new customers directly.
METRO GROUP is following a
similar strategy of focusing and
specialisation with its format
MAKRO Punkt, which Metro
Cash & Carry is currently imple-
menting in Poland and other
countries. MAKRO Punkts regionally aligned product selection and
tailored customer service is designed to appeal specifically to independ-
ent food retailers in the region. The store offers dairy products, fruits,
vegetables, drinks and canned foods, which the retailers can sell on to
end customers in their own shops.
But regardless of which segment of the diverse and varied retail land-
scape a company is active in, the needs and desires of customers are
a major driving force for the entire sector. Consequently, companies
must continuously monitor developments and trends in customer
tastes. Because constantly changing social and economic conditions
also lead to changes in consumers needs.
Compact store formats in central locations
are playing an increasingly important role.
SPECIAL TOPIC
METRO AG 2011
MULTICHANNEL RETAIL 286
Cashiers
NETWORKED SALES CHANNELS:
MULTICHANNEL RETAIL
Online retail has experienced enormous growth in recent years. In
Germany alone, the sale of so-called durable goods, electronic prod-
ucts and clothing almost tripled between 2003 and 2009. Retailers
believe that a tighter dovetailing of sales channels could deliver even
greater opportunities. Multichannel strategies are being developed
that are intended to provide customers with the same product offer-
ings and level of service regardless of whether they make their pur-
chases on the Internet or on the high street. Retail companies with
roots in bricks-and-mortar retail could be the growth drivers for this
development.
SPECIAL TOPIC
METRO AG 2011
On 6 August 1991, almost exact-
ly 20 years ago, the British
physicist Tim Berners-Lee
changed history. In an online
discussion forum, he published
an article about a computer
program that he had simply
dubbed World Wide Web. Originally, it was designed to aid particle
physicists to share documents that were stored on different com-
puters via a network. Berners-Lee invited the readers of this forum
to visit the first-ever Web server: Anyone who wants to help is
welcome to join in! It marked the birth of the Internet as we know
it today. Just three years later, Netscape created one of the corner-
stones for online retail: the US software company published Naviga-
tor, a browser that made it possible, for the first time, to transmit
encrypted data across the World Wide Web. From this moment
onwards, customers had the possibility to make secure purchases
via the Internet. The first company to take advantage of this was the
fast-food chain Pizza Hut, which developed an online ordering sys-
The World Wide Web has revolutionised
the way we shop today.
The anytime,
anywhere offering
SPECIAL TOPIC
METRO AG 2011
NUMBER OF INTERNET USERS WORLDWIDE
1995 39.6 million
2000 361 million
2010 1,967 million
290
tem. And others soon followed: in 1995, Amazon was launched as a
dedicated online bookshop. Over the following years, the company
continuously expanded its offering and quickly became the top dog
in e-commerce, as online retail soon became known. Today, Amazon
is a public company worth around 70 billion euros. Just for com-
parison: Wal-Mart, the worlds biggest retailer, boasts a market
capitalisation of around 130 billion euros.
MULTICHANNEL RETAIL
E-COMMERCE IN GERMANY OVER TIME
1995 1999 1999 2001 2001 2008
Media (books, DVDs ...)
Travelling
Clothing
Durable consumer goods
Toys
Luxury goods
Food
SPECIAL TOPIC
METRO AG 2011
The shopping revolution

Berners-Lees World Wide Web has revolutionised the way we shop
today. For one thing, it has drastically extended the ranges of goods
available to consumers and companies. To illustrate this: according
to estimates, in 2010 around 390,000 companies in Germany were
active in e-commerce. And this does not include the countless inter-
national retailers that are ac-
cessible at the click of a mouse
button or via smart phones. In
addition, the Internet makes
large quantities of company and
product information available
and comparable: for instance,
in the form of reviews and evalu-
ations from other consumers.
Studies show that customers
are making extensive use of
these new possibilities, espe-
cially in the consumer electronics segment. Here, around nine out
of every ten customers research online before making a purchasing
decision. When it comes to clothing and shoes, around 58 percent
of customers see the Internet as an important source of information,
and even for food products the number is as high as 42 percent. The
comparability of information is increasing particularly when it
comes to prices. Some websites, such as billiger.de or geizhals.at,
even specialise in continuously monitoring Internet retailers and
offering their users transparent, at-a-glance comparisons. Sites
like these are very popular among bargain hunters. When it comes
to online shopping, young people between 18 and 30 in particular
place great emphasis on low prices. For the 30- to 65-year-olds the
time savings are almost as important. Easy product searches and
large selections are other criteria that are particularly significant
for online shoppers.
When it comes to online shopping, young
people between 18 and 30 in particular place
great emphasis on low prices.
SPECIAL TOPIC
METRO AG 2011
Online information, offline purchase?
Its true for both online and offline shopping: customers do not al-
ways necessarily make their purchases in the same place where
they do their product research. A 2010 study by the business con-
sultancy Accenture and the German consumer research association
Gesellschaft fr Konsumforschung (GfK) showed that customers
often prepare themselves for online purchases by checking out items
in bricks-and-mortar retail. According to the study, around 35 per-
cent of nonfood Internet sales in Germany could be put down to
products that customers had looked at first in a shop. That corres-
ponds to a sales volume of around 5.4 billion euros. In the durable
goods, consumer electronics and clothing segments in particular,
consumers continue to call on the services of classic retailers.
These include goods presentation and demonstration as well as
expert advice. Many customers also do not want to forego the in-shop
THE INTERNET, A DECISION-MAKING AID
38 percent of consumers carry out Internet research before they purchase a
product in the shop.
35 to 37 days is the average elapsed time between initial research and
purchase.
3 to 4 different Internet pages are visited during the research phase.
purchasing experience, even if they have already set their minds on
the Internet as their buying channel, claim the surveys authors. But
there is also movement in the other direction: from online to bricks-
and-mortar retail, in even larger numbers. According to Accenture
and GfK, customers spent around 8.5 billion euros in bricks-and-
mortar stores and outlets on products that they had first researched
on the Internet.

MOBILE SHOPPING
2009 250 million
2014 1 billion
Multifaceted dovetailing
So it is clear that the Internet can be seen as a huge opportunity for
bricks-and-mortar retail rather than a threat. Companies that have
a high profile both off- and online will benefit in particular, primar-
i ly by reaching customers via various different sales channels. The
approach is known as multichannel retail and its a tactic that more
and more retailers are turning to to counter the rising number of pure
online traders. With a multi-pronged distribution customers can
choose between various channels to take advantage of a vendors
offering i.e. between the bricks-and-mortar shops, mail order and
online shop. Ideally, the various individual channels and the pro cesses
behind them are closely interlinked. All customer information, data
on orders, offers and promotions as well as all processes involved
are centralised to provide customers with seamless interaction and
to tap synergies for the retailers. After all, the benefit for both con-
sumers and companies is not so much in the number of channels but
rather in their close dovetailing: customers should be able to switch
between sales channels as and when they want without being disad-
vantaged in terms of the breadth and depth of the product range,
price, quality of advice and service on the contrary.
Take buying a TV, for example: a customer has checked out the
website of the retailer of his choice and found the model that suits
his requirements. He puts the product in his virtual shopping basket,
SPECIAL TOPIC
METRO AG 2011
295 MULTICHANNEL RETAIL
but before buying it decides he would prefer to actually see it in the
store. At the outlet, he receives not only expert advice, but can also
buy the device for the same price and take it with him. Alterna-
tively, he has the choice of completing his online purchase at a
terminal in the store and having his TV delivered to his home. In
addition to this, warranty cases or exchanges can be dealt with
either online or offline.
Tomorrows shopping experience today
The sales models of most retailers are still a long way off from this
vision. But in many large companies there is a great deal of impetus
to steer in this forward-looking direction. Just in March 2011, the
retail giant Wal-Mart announced the USA-wide introduction of its
Pick up today concept. Customers can now put together online
orders from a product range of up to 40,000 items. These will then
be packed together and be ready for collection at one of 3,600 Wal-
SPECIAL TOPIC
METRO AG 2011
Mart stores within a maximum of four hours. Up till now, the offer
has been limited exclusively to nonfood products. In Germany, Rewe
and Real are testing similar concepts that also include fresh foods.
While Rewe Express Drive is based in an existing supermarket in
Cologne, Real Drive has elected to test the idea of an independent
collection store. Customers can put together their order on the
website www.real-drive.de. Two hours later, their shopping is ready
for collection at the drive-in station in Isernhagen near Hanover.
Customers simply enter their order number at one of the three
terminals or scan the barcode on a printed out order form. Then
they can drive to one of the collect and pay stations where employ-
ees are waiting to load their shopping into their vehicle. Generally
speaking, people use our service to do their weekly shop, explains
Michael Hommel, manager of Real Drive. Its not unusual for us to
see quite large purchases of between 100 and 150 euros. It turns
out that drive-in customers are less price-sensitive. For instance,
budget beers do not sell as well here as in the bricks-and-mortar
Real hypermarkets.
BREAKDOWN OF MULTICHANNEL SALES
Textiles
Textiles total
5%
Womenswear
5%
Menswear
5%
Childrenswear
6%
Underwear/swimwear
5%
Shoes/socks
3%
Home textiles
5%
Sportswear
7%
Electronic goods
Electronic goods total
19%
Electrical devices/kitchen
14%
Consumer electronics
23%
Computer/software
24%
Telecommunications/office technology
21%
Cameras and accessories
22%
Others
Furniture/mattresses
11%
Home improvement and DIY
7%
Household goods
5%
Camping/sports equipment
14%
Toys
9%
Books and office stationery
7%
Watches/jewellery
6%
Sources: Accenture Analyse GfK Universalpanel 2009
Success factor service, success factor price
The dovetailing of sales channels can take many different forms. A
key success factor for multichannel strategies is that they offer
customers genuine benefits; for instance, greater shopping con-
venience, improved product information or time savings. The US toy
retailer Toys R Us which
also offers its customers the
possibility of ordering products
online and collecting them at
the stores has recently added
an extra range of services. One
of these is a check of product availability in stores. The customers
simply select an item on the companys website and specifiy their
own location. The system then suggests stores in the area that have
the selected product in stock. In stores, the toy retailers employees
provide extra assistance in helping customers track down articles
that are not currently on the shelves. If an item is not available at a
location, it will be reserved or delivered directly to the customers
address. Alternatively, the employees can make classic online orders
on behalf of customers.
SPECIAL TOPIC
METRO AG 2011
299 MULTICHANNEL RETAIL
A key success factor for multichannel
strategies is that they offer customers
genuine benets.
This form of service requires high-performance IT systems that
make trouble-free dovetailing of channels possible in the first place.
Online customer queries, for instance, need to be dealt with within
a reasonable period of time via a call centre. In addition, logistics
services need to be perfectly harmonised to ensure that customers
enjoy a consistent shopping experience regardless of the sales
channel chosen. This applies especially to fresh foodstuffs, due to
the high quality requirements and safety regulations. The cost
structures of pure online retailers also called pure players are
often better than those of companies operating bricks-and-mortar
retail. On the Internet, for instance, aspects such as range, price
and sales promotion measures can be updated much more quickly.
Multi-pronged strategy
Media-Saturn is meeting these challenges with a multi-pronged
strategy. The acquisition of the pure player Redcoon in 2011 has
given the METRO GROUP sales division the means to address con-
sumers whose shopping behaviour is different from the companys
regular customers. In addition, Media-Saturn is also accelerating
the move to multichannel sales with a comprehensive service of-
fering. We want to continue to offer customers the best prices for
products and services, regardless of whether they buy in-store or
online, explains Horst Norberg, CEO and Chairman of the Manage-
ment Board of the Media-Saturn Group. With this in mind, Media
Markt has, for example, established a core range of some 3,000
products that will have the same price in both bricks-and-mortar
and online retail. The Media Markt online shop will launch in Janu-
ary 2012; Saturn started its service in October 2011, in its 50th
anniversary year. The sales di-
vision is planning for annual
growth of 11 percent for online
business in its core markets,
which include Germany, Italy and
Spain. By 2016, Media-Saturn
expects to be generating around
31 billion euros in Internet
sales. Just for comparison: in
their classic bricks-and-mortar
trade the sales division estimates annual growth rates of just
1 percent with an expected sales volume of 145 billion euros for 2016
in the key markets. These figures and the relationships between
them make one thing clear: the Internet may be the future of retail,
but there is still no way past bricks-and-mortar retail.
The Internet may be the future
of retail, but there is still no way past
bricks-and-mortar retail.
SPECIAL TOPIC
METRO AG 2011

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