why baumax and praktiker disappeared – why did they fail? · • baumax failed for its foreign...
TRANSCRIPT
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
1
Why baumax and Praktiker disappeared – why did they fail?
Stockholm, 9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS (University of Applied Sciences) Bonn-Rhein-Sieg
Prof. Dr. Dr. Thomas ROEB M.A.
clients (selected retailers) contact
• AMS Sourcing B.V. (NL) CEO
• atb market (UA) Marketing Director
• Anton Schlecker VP Purchasing
• basic AG CEO
• Delhaize Group (B) Senior VP Group Purchasing
• Denner AG (CH) CEO
• denree GmbH CEO
• dm-drogerie markt GmbH & Co. KG Owner/CEO
• EDEKA Zentrale AG & Co. KG Director Marketing
• Gebr. Bratzler Fruchtgroßhandel CEO
• Ihr Platz GmbH & Co. KG VP Sales and Purchasing
• Jawoll GmbH Owner/CEO
• Kopeika (RUS) Consultants to the Board
• Kaufland Stiftung VP Purchasing
• Lidl Discount Stiftung CEO
• Nordwest Handel AG 3 different CEOs
• Penny Discount CEO
• Plus Warenhandels GmbH CEO
• Praktiker AG CEO
• REWE AG CEO
• Tchibo AG VP Sales & Marketing
• Weltladendachverband e.V. Head of Marketing
2
Prof. Dr. Dr. Thomas ROEB M.A.
clients (selected suppliers):
• n.v. artic s.a.
• AVO-Werke August Beisse GmbH
• Axel-Springer Verlags AG
• Bongrain Deutschland GmbH
• GlaxoSmithKline Consumer Healthcare …
• Hewlett Packard Europe
• Intersnack Knabber-Gebäck GmbH & Co. KG
• Josef Schmitz Grafschafter Krautfabrik GmbH
• Laverana GmbH
• Moksel-Gruppe
• Nestlé Deutschland AG
• Fleischwarenfabrik Heinrich Nölke GmbH & Co
• H.&E. Reinert Westfälische Privat-Fleischerei …
• SC Johnson GmbH
• Westfleisch
3
Prof. Dr. Dr. Thomas ROEB M.A.
clients (selected others):
• Bundesministerium für Verbraucherschutz, Ernährung und Landwirtschaft (Ministry of
Consumer Protection, Food and Agriculture)
• CMA Centrale Marketing-Gesellschaft der Deutschen Agrarwirtschaft mbH (Central
Marketing Organization of the German Agriculture)
• Die Verbraucherinitiative e.V. (Association for the protection of consumer rights)
• Gesellschaft für technische Zusammenarbeit GTZ (Society for technical cooperation
between Germany and developing countries)
• Lebensmittelzeitung (Germany´s leading specialist journal for food retailers and
manufacturers)
• SEB AG (bank)
• KPMG
• Kurt Salmon Associates
• McKinsey & Company
• Roland Berger Strategy Consultants
• wbpr Gesellschaft für Public Relations und Marketing GmbH
4
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
5
• both baumax and Praktiker were no real discounters, but only Praktiker failed for this
• baumax failed for its foreign expansion, if failure is the right expression
• Praktiker failed because it tried in vain to compensate its cost disadvantage by using aggressive promotions
baumax and Praktiker were completely different – in their concept and their failure
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
6
There are many ways leading to price leadership – the Aldi-way is only the exception
small assortment
lean operations
low absolute costs
low prices
high sales
low relative costs
vertical integration
lean operations
low absolute costs
low prices
high sales
low relative costs
small assortment
lean operations
low absolute costs
low prices
vertical integration
lean operations
low absolute costs
low prices
high sales
low relative costs
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
7
baumax and Praktiker didn´t take any of them – indeed they weren´t real discounters at all
baumax concept
• assortment size: 60.000 SKUs (before restructuring) / 55.000 (after restructuring)
• pricing: officially EDLP, but in reality neither ED (every day) nor L (low), but in reality strong promotion-orientation and generally high price level
• „Aldi“-type (EDLP, limited assortment) concept tested in Eastern Europe (2010/2011), but stopped for unclear reasons
Praktiker concept
• very strong promotional pricing (“20% on everything except pet food”)
• non-promotional prices above average
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
8
• both baumax and Praktiker were no real discounters, but only Praktiker failed for this
• baumax failed for its foreign expansion, if failure is the right expression
• Praktiker failed because it tried in vain to compensate its cost disadvantage by using aggressive promotions
baumax and Praktiker were completely different – in their concept and their failure
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
9
The key reason for baumax´ failure lay elsewhere: in its expansion into Eastern Europe
65
24
14 15
3
7
15
8 7
Austria 1992:CzechRep.
1992:Slovakia
1993:Hungary
1995:Slovenia
2000:Croatia
2006:Romania
2008:Bulgaria
2010:Türkei
baumax: foreign operations 2014 and starting year
• foreign expansion was too fast (on average one new country per two years in the years 1992 - 2010)
• foreign expansion into the wrong countries (Eastern Europe and Turkey), the potential of which was over- and the crisis underestimated: in 2014, 6 of 8 foreign markets were hopelessly loosing money. Only the first two markets CZ and SK were profitable
• wrong focus of management, e.g. in 2012 out of 5 VPs only one for sales/purchasing, the others for finance, real estate, social issues and art (!)
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
10
But the core business (A, CZ, SK) was good enough for baumax to become an orderly exit – as opposed to Praktiker
baumax
• no bankruptcy; instead restructuring and orderly M&A process leading to sale
• 9.500 out of 11.000 jobs preserved
• no financial losses for employees, suppliers and landlords
• losses only for banks, but 70% of debt reimbursed
Praktiker
• full-scale bankruptcy even dragging down the profitable subsidiary “max bahr”
• all jobs lost
• almost all claims of employees, suppliers, landlords and banks lost
• major loss to investors
difference between failure of baumax and Praktiker
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
11
• both baumax and Praktiker were no real discounters, but only Praktiker failed for this
• baumax failed for its foreign expansion, if failure is the right expression
• Praktiker failed because it tried in vain to compensate its cost disadvantage by using aggressive promotions
baumax and Praktiker were completely different – in their concept and their failure
12
Praktiker didn´t have the cost advantage required from a discounter
source: annual reports, estimations Prof. Dr. Dr. Thomas Roeb M.A.
33,1%
29,3% 27,0%
14,0%
Hornbach Praktiker Supermarkt Aldi
cost as a % of sale
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
13
Praktiker tried to generate cost-advantages through price reductions
source: estimations Prof. Dr. Dr. Thomas Roeb M.A.
-20,0%
200,0%
11,9%
28,8%
price reduction sales increase share of promotiondays in total days
share of promotionsales in total sales
parameters of Praktiker 20%- promotions at the beginning
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
14
The sales increase leads to a significant reduction of the share of fixed costs in overall costs
source: annual reports, estimations Prof. Dr. Dr. Thomas Roeb M.A.
100,0%
33,0%
fixed costs, non-promotionallevel
fixed costs, promotional level
fixed costs as a function of sales
• space costs (!)
• depreciation of store furniture
• HQ
• advertising
• …
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
15
staff productivity wasn´t affected by the 20%-promotions
source: calculations Prof. Dr. Dr. Thomas Roeb M.A.
100,0%
80,0%
100,0%
20%
staff productivity initiallevel
productivity loss due tolower prices
productivity gain due tohigher sales
staff productivity finallevel
Entwicklung der Personalproduktivität infolge der Aktionen
25,0%
100,0%
average price
reduced by
20%
-> volume
increases by
25% to
maintain sales
levels
-> productivity
reduced by
20%
tripling of
sales leads to
staff
productivity
increase of
25%
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
16
In addition, the price reduction of 20% doesn´t lead to a reduction of the margin by 20%-points, but just ca. 15%-points
59,5% 59,5%
40,5%
20,5%
non-promotion promotion
margin
price ofpurchase
margin as a function of promotional pricing
100%
80%
„20% on everything except petfood“
= 40,5% of 100%
= 25,6% of 80%
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
source: calculations Prof. Dr. Dr. Thomas Roeb M.A.
17
However, Praktiker didn´t succeed – unlike Aldi – to increase sales surface productivity, i.e. overall sales in existant stores
source: annual reports
1.810 €
1.657 €
1.506 €
995 €
Hornbach Bauhaus Obi Praktiker, D Max Bahr, D
sales surface productivity
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
18
the sales impact of promotions decreased with the frequency of promotions
11,9%
39,6%
share of promotional days
200,0%
100,0%
2006 2007
increase of sales during promotions 28,8%
56,7%
2006 2007
share of promtion sales in total sales
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
source: calculations Prof. Dr. Dr. Thomas Roeb M.A.
19
the compensate for this, Praktiker was forced to increase its margin, killing its discount claim
Quelle: Geschäftsberichte, Schätzungen Prof. Dr. Dr. Thomas Roeb M.A.
37,5%
23,0%
40,5%
26,7%
margin, non-promotion margin, promotion margin, non-promotion margin, promotion
Praktiker: Margin as a function of promotional sales
Praktiker margin mix 2007 Praktiker margin mix 2007
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
20
So, what does that mean for discounting in DIY: discounting must be more like IKEA, than like Aldi; efficiency gains are much harder to attain
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]
small assortment
lean operations
low absolute costs
low prices
high sales
low relative costs
vertical integration
lean operations
low absolute costs
low prices
high sales
low relative costs
in fmcg, assortment size is driven by brand variety more than by product variety -> assortment size can easily be shrunk by relying on private labels in DIY, varity is driven by wide range of different products -> private labels can make only a limited contribution to assortment size
21
thank you for your attention!
4th Global DIY-Summit
9th Juni 2016
Prof. Dr.rer.pol. Dr.-Ing. Thomas Roeb M.A. HS Bonn-Rhein-Sieg - [email protected]