Joop's pick

Galleria Kaufhof, one of Germany's oldest department store chains, has found a new ally to help bolster its image: fashion designer Wolfgang Joop.

Kaufhof has fared better than Karstadt, another dominant department store that was rescued from insolvency in September by billionaire investor Nicolas Berggruen. Berggruen recently announced that Karstadt will collaborate with Californian designer Max Azria.

Part of the reason why German department stores are grasping for outside help to attract customers is a changing commercial landscape that has challenged their very business model.

Beyond the fact that inexpensive online offerings are grabbing business that has traditionally gone to department stores, experts say an increasing amount of smaller clothing stores housed in inner-city shopping centers are gaining market share.

A Kaufhof spokeswoman said the company chose Joop because he not only knows the German market but also brings international expertise with him, and also because he is creative and accessible. The department store focuses on fashion, home and beauty, all areas of Joop's expertise, according to the spokeswoman.

“A department store like Galleria Kaufhof also reflects the zeitgeist, and so we constantly have to be developing,” she told Deutsche Welle. “We weren't just looking for a face. Instead, we were looking for someone who would really be a creative partner in developing new things.”

Targeted appeal needed

According to Commerzbank analyst Juergen Elfers, the current market situation requires department stores to do more than compete among each other.

“Department stores like Kaufhof are no longer just in competition with one another,” he told Deutsche Welle. “Each new shopping center, which is built in inner cities, now has very many clothing stores as tenants. And Kaufhof has to compete with them, as well. That's why it's important for them to enhance the image of their department stores, especially in major cities.”

Unlike Karstadt, Kaufhof has remained profitable for a number of reasons, according to Elfers. Kaufhof reduced its offerings in breadth and depth, tailoring what it does offer to satisfy demand. The company also effectively implemented its own brand of wares along with personnel management changes, which employees accepted.

“Karstadt has time and again had to use money to plug holes in its finances,” Elfers said. “The management hasn't been able to fully concentrate on further developing the company, partly due to cash restraints.”

No single approach

Boris Hedde, director of the IFH market research institute in Cologne, said Kaufhof's ability to tailor its offerings to specific clientele has been invaluable. He pointed out that smaller non-chain department stores thrive in regions of Germany to which they have adapted.

“A comprehensive program won't work… we've seen that from the past. So a targeted approach is necessary, and the challenge will be to meet the needs of specific regions,” he told Deutsche Welle. “The concept needs to start with the customer. It will be interesting to see if Joop can find an approach that brings together the individual target groups. That remains to be seen.”

Hedde added that Joop's name is associated with “high-value, design-orientation and modernity,” and that he will likely “want to set some things in motion rather than just having picked up a sponsorship.”

Metro to sell

According to Commerzbank's Elfers, the Metro group is trying to sell Kaufhof because of its international ambitions.

“Metro is very much internationally oriented, and department stores are difficult to internationalize,” he said.

Kaufhof's turnover last year was roughly 3.5 billion euros. The company employs some 25,000 people, and has about two million customers daily. Earlier this year there was speculation about a possible Kaufhof-Karstadt merger.

Author: Gerhard Schneibel
Editor: John Blau