Best wishes for an innovative 2012!


Best wishes for an innovative 2012!

Will 2012 be a rich or a poor year for retailers? While the grim economical climate makes most people hesitant, as Gino Van Ossel (professor at Vlerick Management School) and Dominique Michel (Belgian trade federation Comeos) confirm in elaborate articles next week, retail watcher Herman Konings has another opinion: usually it is in the most difficult of circumstances that the best ideas and strongest innovations are born.

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Thomas Cook closes 200 travel agencies after 620M loss

Thomas Cook, the second biggest travel company in Europe, has announced to close 200 of its 1300 British travel agencies, 125 more than announced earlier. The move, caused by disappointing financial results, lifts the job loss to 660. The group also aims to sell 6 of its 41 planes and about 500 hotels in an attempt to reduce the company's net debt of over 1.3 billion euro.

Exceptional charges sink yearly profits

In general, the financial year that ended on 30 September was not all bad, as revenue rose to from £8.9 billion to £9.8 billion (€10.6 to 11.7 billion) and underlying profit was still £303.6 million (over €360 million). Due to 'exceptional charges' however, results before tax went down from a £42 million (just short of €50 million) profit to a loss of £378 million (€475 million). The reported loss after tax was £518 million (€620 million), down from a £3 million profit last year.


The results did not come as a complete surprise, as the group had issued three profit warnings in 2011. The world's oldest travel agency (founded in 1841 and in Belgian hands until 1948 as part of the mythical Wagons-Lits company) was barely saved from bankruptcy by a £200 million (€240 million) emergency loan from banks last month. 

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Walmart to gain $3.4bn by reducing packaging

Walmart and Amazon, the biggest offline and the biggest online retailer in the world, have started a program to reduce excessive packaging. In two years time, Walmart hopes to reduce its packaging by 5% (compared to 2008), resulting in a staggering $3.4 billion (€2.5 billion) less spendings on packaging per year.

Garbage: 350 kilos per person per year

The American Environmental Protection Agency estimates that one third of all the garbage in the US is packaging, amounting to over 350 kilos per citizen per year. In December, the problem becomes even more acute, as household waste increases a further 25%. Apart from financial considerations, the giants' program is therefore also based on environmental issues.

Frustration free packaging

Personal experiences also sparked the decision: like many people, Amazon founder Jeff Bezos has experienced 'wrap rage' or “the stress that people feel when they can't open the packaging of a product”. His company now helps its suppliers in finding innovative methods of packaging that reduce the stress on man and nature, by using less packaging made from more recyclable products.


Amazon has been working on its “Frustration free packaging” since 2008, when the first 19 products met the program's standards. Now over 80,000 products (representing over 12 million items sold) meet the requirements, and Amazon hopes to triple that number in 2012.

97% garbage reduction

Walmart too is taking initiatives in this field: Hewlett Packard has won a design challenge of the world's biggest offline retailer by designing a protective bag for its notebooks that reduced packaging of 97% and, also important: reduced the required transport capacity by 25%. Another solution was developed by bluetooth headset maker Plantronics: by replacing AC chargers with (far smaller) USB cables, less material is needed – both for products and packaging...

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Metro confirms new potential buyer for Kaufhof

KaufhofMetro AG, Germany's largest retailer, has confirmed talks with Wolfgang Urban, ex-CEO of KarstadtQuelle, who wants to buy department store chain Kaufhof for a group of families from Düsseldorf. According to Bild am Sonntag, the group wants to buy a majority of 51%, but is prepared to buy 100% of the shares if necessary.

Three parties interested

Urban started his career at Kaufhof, but moved on to lead KarstadtQuelle – another interested party in the Kaufhof chain. Business newspaper Handelsblatt however reported that the bid by Karstadt's new owner Nicolas Berggruen has been rejected by Metro.


The status of the third proposal, that of Austrian Signa and the Greek billionaire George Economou, is unclear. Metro CEO Eckhard Cordes, who has been looking for years to sell Kaufhof, has recently stated he abandoned his hope to sell the chain before the year is over.

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Hungary bans construction of shopping centres

The Hungarian government has agreed to temporarily ban the construction of new shopping centres. In the next three years, building commercial buildings of more than 300 m² will be forbidden. With this measure, the government hopes to strengthen the position of Hungarian retailers.

Defending Hungarian retailers

“The goal is for the structure of retail to take a change for the better”, said government spokesman András Giró-Szász, who claimed that “69% of Hungarian retail is controlled by 1% of all retail enterprises, typically international corporations.” He said that exceptions could be granted by a special committee, but the conditions to be met are still unknown.


The Népszabadság newspaper claimed Aldi and Lidl would be the decision's main targets: both continue to grow in Hungary, despite (or owing to) the crisis. Other important foreign players on the Hungarian retail market are British Tesco and French Auchan, who would also be banned from building new hypermarkets.

... but endangering Hungarian builders

Representatives of real estate agents, shopping centres and employers are not too amused with the ban. “An average shopping centre creates 1000 jobs”, says Gergely Árendás of real estate agent Wing. His sector has been in a crisis since the Lehman Brothers bankruptcy of September 2008. Last year, the number of new contracts went down a staggering 37%.


Ferenc Dávid, spokesman of VOSZ (the Hungarian association of entrepreneurs and employers) warned that the ban will “deliver a blow to the domestic construction industry”. György Vámos, secretary general of OKSZ (the Hungarian trade association) also warned that the most important victim of the new ban will be the construction companies.

Saturated market

For the Hungarian shoppers, this ban is not necessarily a bad thing: the Hungarian shopping centre market is saturated. There are over twenty malls in Budapest alone, and given the average occupancy rate of 80, there is still a lot of room for expansion within the existing buildings.


The difficult relation between Hungarian chains and international corporations is not new: recently the CBA chain announced to be interested in buying the local stores of Cora, Match and Profi – all owned by Belgian group Louis Delhaize – to earn a stronger position against the foreign competition.


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Unilever profits from emerging markets boost

In line with earlier quarters, Unilever has again announced decent company results. The British-Dutch company was “pleased” with the quarterly results, but warns that margins for the whole year are under pressure. Unilever also announced its next target group: wealthy Brazilian women.

12.1 billion euro turnover in Q3

Unilever's third quarter turnover rose 7.8% to 12.1 billion euro, but most of the growth is caused by higher prices (+5.8%) – with volume growing only 1.9%. “The results are especially encouraging against the backdrop of very uncertain consumer demand and hugely volatile commodity markets”, CEO Paul Polman said.


Turnover growth was particularly significant in 'emerging markets' (+13.1%), while in Western Europe lower volumes meant turnover dropped 0.5% - Unilever specifically blames the terrible European summer and its repercussions on ice cream sales. Both other regions, the Americas (+9.1% to 4.02 billion euro) and Asia, Africa and CEE (+12.4% to 4.88 billion) are now significantly larger than Western Europe's 3.22 billion euro turnover. Personal care was the fastest growing of the four Unilever 'categories' (+11.3% to 4.11 billion euro).

Margins under pressure

However, not all news is good: rising raw material prices mean a greater pressure on Unilever's margins. “We have sought to mitigate the impact of commodity inflation on consumers by pricing to recover cost rather than to maintain margin. As a result of these factors we now expect underlying operating margin in 2011 to be flat to slightly down”, Polman warned.

Unilever's new focus area is Brazil, where it has launched 80 new shampoos and conditioners on the market of middle class women – who spent 8.2 billion euro on cosmetics last year. The company also bought cosmetics producer Kalina to invade the Russian market as well.

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Metro-CEO Eckhard Cordes steps down next year

Eckhard Cordes, Metro Group's controversial CEO, has decided to step down at the end of his current contract in October 2012. Cordes will remain in function until then, but he stated that a new, younger generation of managers should take over and continue Metro Group's positive evolution.

"Company before own interests"

Despite his capitulation, the CEO made clear he claims the honours for Metro Group's record profits the group published last March – a party that was crashed by Erich Kellerhals, Cordes's nemesis and important minority stockholder of Metro Group. His plead for a younger generation at the top of Metro Group is therefore an overt signal against the 72 year old Kellerhals towards the supervisory board and Metro's shareholders: “The company's interests should always take precedence over individual interests, even over mine”, he said (while meaning: “and certainly over his”).


Even though Kellerhals now gets his way, he will have to wait another year for Cordes's exit – a year that the current CEO can use to contain Kellerhals's influence in Metro Group's decision-making. Apart from that, it remains an open question what Cordes can accomplish during his last year at the top of Metro: he ended the harmful speculations regarding his own position, but the fact remains that he failed to sell both department store chain Kaufhof and hypermarket chain Real, two parts of the Metro Group that are continuously under-achieving.

Metro to become a pure player?

“The most obvious choice for Metro would be to focus only on its cash & carry activities”, says German Lebensmittel Zeitung's Mike Dawson. “It would make Metro a 'pure player', which analysts now favour immensely – even though they had been demanding diversification for years, as to reduce risks. If Metro focuses on cash & carry only, the group would become more vulnerable, but the department stores are simply not viable and the hypermarkets are not competitive on an international level. 


As a pure cash & carry company, Metro is an interesting target for a Wal-Mart takeover. “Especially because of Metro's market shares in emerging markets”, says Dawson. “Wal-Mart is not interested in Western Europe any more, it changed its attention to China, Russia and similar growth markets. Metro still has to float consumer electronics division Media-Saturn and sell both the dying department store division Kaufhof and the resuscitated hypermarket chain Real before becoming a real pure player.”

Spanish talks failed

The Spanish group El Corte Inglés is not going to help with the Kaufhof sale any more, despite three rounds of negotiations and a lot of rumours. The family business finds itself in financial and economic trouble on its Spanish home market, and decided not to risk any German adventure. 


Dawson meanwhile states that the selling of Real was only delayed because Metro wanted to sell the hypermarkets in one big deal. “There are many cherry pickers, like Kaufland, that are only interested in the best parts of Real. Despite the slightly higher profitability, Real is still a dead division that Metro Group wants to sell as a whole.”

Legacy or no legacy?

The possibility that Eckhard Cordes is able to solve these problems in his last year is negligible. It will be up to the new management at the end of next year to solve these three issues, but probably they will only have a chance if the internal relations and the decision making processes are completely revised. It is very well possible that Cordes will dedicate his last year in office to that end, in order to create a lasting legacy as chairman at Metro Group. 


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Carrefour to expand Italian banking services

Just as credit rating agency Moody's decided to downgrade Italy's bond ratings, French retailer Carrefour has decided to expand its banking activities in its Italian hypermarkets, from 23 to 30 stores - and to a wider range of financial services.

Taking advantage of Italy's difficulties

Moody's decision was no surprise to many analysts and it can not have been one for Carrefour too. It might even have been a deliberate choice made by the French, to take advantage of the lack of confidence the Italians have in their politics and the economic situation.


Retail consultant and banking expert Hans Eysink Smeets thinks that this “was an excellent decision by Carrefour, as research demonstrates time and again that consumers trust hypermarkets and supermarkets infinitely more than they trust banks. Retailers, like Carrefour, are inherently consumer-minded, while banks' talks about being customer-friendly are mostly just vague theory.”

"Helping Italian families"

Vicenzo Grimaldi, director of Carrefour Banca, explained to the Italian media that Carrefour was expanding its banking services “to help Italian families by offering them financial services at very competitive prices.” He went on to explain that “Carrefour itself is running the financial risks, not a third party”.


Carrefour has over 1300 points of sale in Italy, including 60 “ordinary” Carrefour hypermarkets and one new Carrefour Planet hypermarket. Italy is the only country outside of its home market France in which Carrefour offers financial services: in France the Banque Carrefour has existed over 30 years and serves 2.5 million customers.

Full range of banking services by 2014

Carrefour's Italian banking services have so far been limited to offering personal loans and credit accounts for buying at Carrefour (with or without Carrefour credit card), but the chain hopes to expand its services to a full range of banking services – including debit cards and savings accounts – in three years time.


Carrefour clearly hopes to play the trust card, as confirmed by Grimaldi's statement that the chain will closely watch their customers' debt burden : “we will never finance over 60% of the customer's income”, he says. The Italian economy is unhealthy, spendable income is decreasing and there is an increasing risk that customers will not be able to pay their debts. Still, Grimaldi considers this to be a good time to start a bank: “It's a sign of optimism”, he said, just before Moody's downgraded Italy's bond ratings.

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Groupon loses COO and 55% of its turnover in one day

Groupon logoGroupon, the world's most famous deal-of-the-day website, has said goodbye to its COO and to half of its turnover on the same day. Groupon's number two, Margo Georgiadis, has left the group coupon distributor for Google, whereas the SEC urged Groupon to recalculate their turnover and profit figures in a less favourable way.

Short life span for Groupon COOs

Georgiadis lasted only five months as Groupon's COO, having arrived there from Google last April when she left her place as Google vice-president of sales. Georgiadis took over from Rob Solomon, who also lasted only one year as COO under Groupon founder Andrew Mason. In her old and new home Google, Georgiadis will take care of the Americas. FT quoted an employee saying differences in strategy caused Georgiadis' move away from Mason.


Mason claims that the new shuffle at Groupon's top will not compromise the strength of the company – he will now take over a significant part of the COO's responsibilities. Nevertheless, pressure on him keeps growing.

New calculation cuts 55% off Groupon turnover

A part of that pressure comes from the long and hard path to Groupon's flotation, which Mason wants to happen sooner than later as the financial markets seem to have lost their appetite for internet companies – and especially social media. Mason always hoped for the transaction to raise $ 25 to 30 billion (between 18 and 22 billion euro), but saw the company's worth decrease after the publication of new financial data.


En route for its initial public offering, Groupon was forced to recalculate their sales and profit figures, counting only the fees paid by merchants (as opposed to counting the complete value of the coupons) and effectively reducing turnover by over 50%. While the group claimed to have a $1.52 billion sales figure for the first half of 2011 (roughly 1.1 billion euro), Groupon suddenly announced that figure to be only $688 million (0.5 billion euro). It is unclear so far how these new figures will impact Groupon's flotation, which was scheduled for this autumn.

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