Economy

dm boss Christoph Werner: Inner cities will change due to Corona

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The effects of the corona pandemic are also affecting the consumer favorite among retailers: dm. The drugstore chain presented figures from the past financial year on Thursday. Although dm was able to increase worldwide sales by 2.9 percent to 11.5 billion euros, it lost some of its growth momentum compared to the previous year. In the previous year, sales growth was 4.6 percent.

Foreign business was recently seen as the engine of growth, but the pandemic has also weakened this business area. And even in the German market, which recovered comparatively quickly, Corona has left its mark on dm. “The recovery of the consumer climate, which was initially clearly noticeable in Germany, is now cooling down just like the outside temperatures,” said dm boss Christoph Werner at the press conference in Karlsruhe on Thursday. The chairman of the board of management is the son of dm founder Götz Werner.

dm boss Christoph Werner.

dm boss Christoph Werner.

Hardy Müller / dm-drogerie markt

As NewsABC.net already reported, the drugstores in the near-food segment are the losers of the Corona crisis. More and more consumers are foregoing the drugstore and buying their drugstore products in the supermarket, shows an analysis by the market research company Nielsen. According to the consumer panel FMCG of the Gesellschaft für Konsumforschung (GfK), the market share of drugstores fell from 6.3 to 5.9 percent by September compared to the same period last year.

There are no visitors to the stationary business

In the Corona year 2020, Dm is primarily struggling with the decreasing visitor frequency, which is due to an increasing change in shopping behavior. In the past fiscal year, more than 1.7 million customers came to the dm stores every day – but before that it was 1.9 million. People go shopping less often, but instead buy larger shopping baskets and increasingly want to buy everything in one place. Experts call this trend one-stop-shopping. DM cannot meet this need in the same way as food retailers.

In addition, due to the pandemic, customers did not have the opportunity to buy from drugstores: Cosmetic products such as lipstick have been bought significantly less since the mask requirement began. The initial hamster purchases of hygiene products such as toilet paper at the beginning of the lockdown phases could not offset the decline in decorative cosmetics, simply because the unit prices in this segment are significantly lower, Werner explains in an interview with NewsABC.net.

The VAT cut had also failed to have its intended effect: “We did not see a major increase in sales as a result,” says Werner.

Branches in pedestrian zones and train stations suffer particularly

In particular, branches in shopping centers, pedestrian zones and train stations are significantly less frequented. To this day, the number of visitors there has not recovered, says Werner.

“The development of the dm stores in inner city locations has been declining for a long time,” says Werner. The effects of this – and Corona – on the long-term location policy of the drugstore chain will become apparent in the coming years.

“In the future, customers’ needs can – in conjunction with online retail – possibly also be met with fewer stationary branches, as long as the right locations have been selected,” says Werner. So is he already thinking about branch closings or a downsizing of the branch network? “No, it is too early to say that we are closing dm stores,” explains Werner. At the same time, locations would have to be put to the test again and again, for example when rental contracts expire.

“If it should actually be the case that customers will shop differently in the future, i.e. no longer visit so many places, but prefer to meet their stationary needs in specialist stores and shop more online – then that in itself logically means that the need as a whole can also be covered with fewer retail locations, ”says Werner.

The city centers are threatened with desertification

The development of retail locations in Germany is declining anyway. The German inner cities are facing massive structural problems. According to analysts, pedestrian zones have lost up to 20 percent of traffic during the pandemic, but the numbers were declining even before the virus broke out. The trade association (HDE) warns that the effects of the corona pandemic could lead to 50,000 locations within German city centers having to be abandoned.

Instead, consumers buy significantly more online. However, this was also shown to be positive at dm: “The past few months have shown that customers are increasingly shopping online, so that the development of the online shop has been very positive and sales have doubled,” says Christoph Werner. On average, more than half a million customers visited the online shop every day in the past financial year.

Nevertheless, the dm boss is assuming that the drugstore chain will have more new openings in the new year than in the 2019/2020 financial year. 27 new markets were added. For dm, it is not decisive how many locations the family company operates, but rather which ones.

dm relies on larger locations

The company is increasingly relying on larger locations. “We are currently looking at how we can enlarge stores or move some branches.” The management continues to see the trend towards larger markets in the future, explains Werner. The branches in Germany are already larger than abroad.

dm

The trend towards larger locations is only intensified by the corona pandemic. Especially in these times, consumers again appreciate large-scale shopping concepts where they can effortlessly maintain the necessary distance. Other retailers are also experimenting with this. Aldi Süd recently presented the first XXL branch on 2,000 square meters – otherwise 900 to 1,200 square meters are usual.

The drugstore chain’s strategy has long been to invest more and more in existing stores instead of opening new ones. Customers seem to be rewarded for this: dm is one of the most popular stationary stores in almost every consumer ranking. A survey by the market research company Q&A Insights Europe BV awards dm as dealer of the year in the drugstore category.

In the future, Werner could also imagine using innovations such as electronic price tags or virtual and augmented reality (VR and AR) in the branches, if this pays off in the long term. Both technologies would greatly reduce the workload for employees and make their work easier. Labels no longer have to be replaced by hand. Products in the warehouse or in the shop could be found more quickly with the help of VR glasses or AR store navigation via smartphone, for example for the compilation of immediate pickups.

Express collection at the branch after just three hours

Dm is already preparing for the new shopping behavior in the pandemic: Since Wednesday, the drugstore chain has been offering nationwide express pick-up within three hours – previously it took six hours. Customers can use the app or the online shop to place products in the digital shopping cart, these are packed together in the selected dm store and made available for collection. Payment is made online. This special offer is initially only valid until November 30th, the provisional end of the “Lockdown light”. Should the offer be particularly well received and the capacities require it, dm will extend the offer and even make more employees available for this.

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