MediaMarkt’s parent company, Ceconomy, has the key to consolidate the European electronics industry even more. The retailer will sell services and solutions: “We help people make the right decisions.”
Previously: following the split from former Metro Group, Ceconomy has become the name for the consumer electronics group which owns store chains MediaMarkt and Saturn. Just a few weeks after it became independent, it acquired 24.3 % of Fnac Darty: if there had not been any discussion about consolidation in the European electronics industry, there is plenty of talk nowadays. RetailDetail met CEO Pieter Haas at MediaMarkt’s main office in Zellik, accompanied by Sven Degezelle, CEO for MediaMarkt Belgium and Luxembourg.
Haas is very satisfied with the split: “We have had a happy divorce, even though the entire procedure was a bit more difficult than expected, but that is usually the case with divorces. We agreed to divorce on amicable terms, but as soon as money is involved, the discussions become a bit harsher. In any case, we both agree that this was the right call and we can now focus on business”, he said.
Ceconomy promised to look for acquisitions and quickly followed through on that: “It was not really our choice to participate in Fnac Darty so quickly after the split, but it was a golden opportunity. The Pinault family wanted to sell its shares and we had to instantly decide. The acquisition does give use the key to consolidate the European electronics industry even more. We have always said we would be a pioneer and this is a major step in that direction.”
Sent down from heaven
France is a market you cannot ignore if you want to become a European market leader. “We had a 1.9 % market share when we left France in 2011 and we now own 24.3 % of the market leader there. That is an exciting development. It was gift sent down from heaven, perfectly timed as well. The beauty is that we do not have to anything right now. We are a strategic investor and Fnac Darty is a financial operation for us. We can get to know the market without having to do any operational work, something we would not be able to do considering the recent split anyway.”
Everyone has been talking about consolidation in the consumer electronics industry for quite some time, but nothing ever happened. What has changed now? “The industry needs to invest heavily in necessary changes. You need to be multichannel nowadays. You cannot live without electronic price tags. You need a high-performance CRM system, to get your supply chain in check, environmentally friendly stores with led lighting, … A lot of companies are simply not able to invest that much, regardless of their position in their local markets. There is also an increased price pressure and price transparency. The consumer knows everything. Obviously, you will not go bankrupt next week if you do not have electronic price tags, because it takes time to die. However, it will happen in the end. When Black Friday prompts you to lower 1,500 prices, how are you going to do that if you cannot do that electronically?”
“That is why there are consolidation efforts nowadays, on different levels. Fnac Darty could have gone on without us, but desired a collaboration anyway. You can even see it happening on a local level. Earlier this year, an independent retailer, a German Expert member, switched to MediaMarkt. We added MediaMarkt to his store’s front and he now has a future-proof store and growing turnover.”
Who are Ceconomy’s prime competitors in Europe now? “Expert is second, but their independent retailer model is an entirely different business model. Obviously Amazon is a competitor. It might not sell the same products, but it does compete over the same consumer. What I find worrisome is that Amazon “owns” its consumers, which leads them to buy electronics at Amazon as well. The competition basically revolves around the customer.”
That begs the question: how do you compete with the all-mighty Amazon? “I admire Amazon and I buy a lot of things on the platform myself. Their model is extremely easy for the consumer, but it has its limitations. When your product does not work, Amazon cannot help you. I not only refer to broken products, but also to when it does not do what you want it to do. It is not a matter of buying it, but getting git to work. People need someone to help them in their digital life and that is where MediaMarkt comes in. We solve your problem, we empower your digital life. We do not sell boxes, we sell consumers a digital life.”
“If we merely sold products, we are dead already. We help people to make the right decisions. Let’s say you want to buy a wireless Sonos sound system, then you would need to make sure your home’s WIFI bandwidth could handle that. Not only in theory, but also if it would really sustain it, when your children are watching Netflix at the same time… That is where we have to play our part and this goes well beyond an after-sales service or a repair.”
Reparations as a “traffic driver”
Repairs are also still an opportunity to MediaMarkt: “If your iPhone’s glass breaks, you need to go to an Apple Store if you want to keep your warranty. Their response will be to tell you to come back a week later, but people cannot live a minute without their smartphone…That is why we will repair it while you wait. We are talking to Apple to see how we can come to an arrangement that makes sure your warranty isn’t voided. This is our way to distinguish ourselves from Amazon.”
Sven Degezelle backs his CEO: “Our solutions corner with a 40-minute repair is a major success. We welcome a lot of “pure play” customers there, customers that now come to us, a new traffic driver.”
Amazon Echo and Google Home are trending now. What does Pieter Haas think about this voice-operated apps? “Do you mean whether we should also develop such a system? That is going to be a bodemless pit… our role is elsewhere. Google Home in itself is usless, because it needs an ecosystem. Google Home does give us an opportunity to talk about smart homes, the largest non-existing market in the world that is now taking shape. People will need someone to help them and then Alexa will ask “Do you want me to call MediaMarkt?”
“Shopping is not the prime reason for people to use voice recognition. Multichannel is the major catalyst of online sales and Amazon has merely taken out other pure players. Online only works if you know exactly what you need, a purely transactional design.”
Physical stores will remain relevant in this context, according to Pieter Haas. Not everything will move online. “The consumer wants everything: mobile, physical, home delivery…. People are looking for a balance between digital and analog. Multichannel is not such a relevant term. The consumer considers himself to be a MediaMarkt customer, not as a multichannel customer. Yesterday’s retail model is outdated, a time when we had more customers than products. We opened a store, put 500 televisions at discounted price and when the 501st customer arrived, we told him he should have come earlier. Retail nowadays is entirely different and revolves around the premise that you have a customer and what you can do for him.
Stores do change however. “We used to be a big box player, but now we need several store formulas. A consumer no longer wants to spend 30 minutes in his car. Even IKEA is opening smaller stores in city centers, without parking lots. We need to be where the consumer is, which is why we are also opening proximity stores, smaller than 3,000 sqm. We have a location in Berlin’s train station and we have a digital store in the heart of Barcelona. Not everything will work out, but we no longer fear failure, because it is the best way to learn. We need another attitude, namely “fail faster“. Unlike previously in France, where we just kept chugging along for twenty years.
Win-win with Makro
An important strategy is to collaborate with other partners, like food retailers. “They are good at selling boxes, but unlike us, they offer no solutions. They have the room and the traffic, we have the knowledge of the electronics. They serve other customers, people that visit every week and that offers opportunities. That is why we are joining forces with Makro in Belgium, Metro in Russia and Tesco in Hungary. It is a model that works.”
Degezelle confirms: “We now has sections in six Makro stores and we do not see any detrimental effect on our local MediaMarkt stores. Our location in Makro Lodelinsart is 1,000 sqm and it sells more ink cartridges than our largest store in Belgium. We reach other customer types at Makro: often couples, slightly older. We will profitable with these stores right from the first year and it does not impact our other stores, a real win-win situation. I have actually rediscovered Makro this way. Those stores have changed a lot and actually have everything.”
Its 24.3 % stake in Fnac Darty theoretically gives Ceconomy a huge amount of stores in Belgium. What will the future bring for Vanden Borre? “Belgium and the Netherlands are exceptions, because we do not have such an overlap elsewhere. MediaMarkt and Vanden Borre are both strong brands, but there is no discussion today. We have a 24.3 % stake and legally, that is the same as having a 0 % stake. We cannot touch brand names or its store network. We are still competitors, but we can do things together, like joint purchases, obviously within legal boundaries.”
Blockchain and robots
In the meantime, the price pressure is increasing. How can Ceconomy remain profitable? “Our scale is important, because we see that suppliers have rediscovered our stores. What we have been doing as well, is to optimize our processes. Lastly, we will also use the data we would otherwise discard, although that is a task for the future. That is also why we founded Retail Media Group. If we combine the data about online behavior, we can actually send smart ads to our consumers, ads that perfectly match their profile, just like Amazon and Google do. That will only work if retailers understand they need to share their data, because only then will we be able to compete with Amazon and Google. We are very open and already combine our non-personalized data with Metro, Pro Sieben, Saturn, Thalia, Real, iBood, Juke…”
“We are becoming a more IT-driven technology company. Did you know we used to be labeled as the idiots who missed everything. Nowadays, we are at the front of the pack. We have a chief digital officer who has to consider everything that may become important in the next two years, like blockchain. We have to learn to use it and we are also ahead with robotization. Our robot Paul cannot do that much now, but he will become smarter. We are learning and experimenting.”
What is Ceconomy’s purpose, its reason for being? “Why are we around? Because we empower your life in the digital world. We want to be your partner and companion that enables your life in the digital world.”