Economy

Is stinginess no longer cool? The rise and fall of the Saturn electronics chain

Many retailers are currently struggling not only with the effects of the shutdown, but also with competition from online retailing for years. The electronics retailer Media Markt Saturn is doing similarly. For years, the sales of Ceconomy, the parent company behind Media Markt Saturn, which are still by a narrow margin European market leaders.

Despite the online boom in the Corona crisis, Ceconomy wants to continue to hold onto the chain stores. The group is relying on the connection of stationary trade and online business, said CEO Bernhard Düttmann on Wednesday at the company’s online general meeting. “The basis is the business in the stores,” emphasized Düttmann. “The return of customers after the first lockdown has confirmed that stationary retail with personal advice, embedded in our omnichannel strategy, is still the backbone of our success,” emphasized the manager. This is complemented by online business. The pandemic will not change that.

However, online business has also gained massively in importance for Ceconomy during the pandemic. In the important Christmas quarter, the retail giant already made around 30 percent of its sales on the Internet. Düttmann emphasized that Corona, in addition to major challenges for the group, also offers new opportunities, for example in the sale of consumer electronics for the home office. “Equipping schools, for example – but also small and medium-sized companies – offers us many opportunities.”

The most important point at the general meeting was the decision of the shareholders on the settlement of the long-standing dispute between Ceconomy and the Kellerhals family. With almost 99 percent of the votes cast, the shareholders approved a capital increase that enables the family of the Media Markt co-founder to swap their shares in Media-Saturn-Holding for a stake of up to 29.99 percent in Ceconomy so become the largest Ceconomy shareholder. According to the electronics retailer Düttmann, this will not only allow its structures to be simplified, but also enable the use of loss carryforwards in the billions.

Media Markt and Saturn are managed as two brands – a conscious decision because Ceconomy repeatedly emphasizes how important the “two-brand strategy” is. However, the number of stores already shows which brand the focus is on: Ceconomy operates around 1,000 stores of both brands in 13 countries and employs around 53,000 people. 850 of these are Media Markt locations – Saturn only has around 150 branches.

Some of the reasons for the poor development of Saturn go back decades. We’ll take you on a little journey through time into the company history of the Saturn brand and show you why only one brand will probably survive in the long term.

1961: The founding of Saturn

The first Saturn-Hansa store was opened in July 1961 by Friedrich Wilhelm and Anni Waffenschmidt at Cologne’s Hansaring. Initially, however, until 1966 the company primarily supplied diplomats with entertainment electronics worldwide. A trip to New York in 1959, where Waffenschmidt visited the allegedly “largest record dealer in the world”, Sam Goody, inspired the German to expand the sound carrier market in Germany in the retail sector. Until 1966, records were subject to fixed prices, but a ruling by the Federal Court of Justice that year overturned this, which paved the way for Waffenschmidt for individual retail pricing.

From 1969: focus on inexpensive records

From 1969 onwards, private customers could also shop at Saturn, and in 1972 the first technology department store followed in Cologne, with the supposedly “biggest record show in the world” at discount prices. The Saturn founder clearly undercut the non-binding guide prices for records, which is why competitors initially thought it was crazy, but within a year it became Germany’s record dealer with the highest turnover. Just as other discounters did, Waffenschmidt passed on the volume discounts that came with bulk orders directly to its customers.

In the early 1980s, Saturn expanded this approach to include radios, televisions and other electronic devices and became Germany’s largest electrical department store.

From 1985: The company is sold twice

In 1985 the Waffenschmidts sold the company to Kaufhof Warenhaus AG, under whose leadership additional branches were opened, first in Frankfurt and then in other German cities. In 1990 Media Markt Holding bought Saturn from the Kaufhof Group and the two electronics stores were continued decentrally under a two-brand strategy.

1996: Incorporation into Metro AG

From 1996 the Media Markt Saturn Holding then belongs to the Metro Group, which emerges from a merger of various retail companies, including above all Metro Cash & Carry wholesale stores and Kaufhof Holding AG, which holds its majority shares in the holding company of MediaMarkt and Saturn in brings in the association.

2002 to 2007: Greed is cool

From 2002 to 2007, the legendary advertising campaign with the slogan “Avarice is cool” was played in Germany, which played a major role in the success of Saturn. At the same time, the advertising triggered a nationwide debate about consumer behavior among Germans.

From 2013: location closings in Europe

With the increasing online trade, the competition for stationary sales with electronics grew tremendously. In 2013, the company finally announced that it would give up Saturn in four international markets. After a long back and forth, the brand’s withdrawal from Switzerland was finally announced in 2013. The Saturn brand was also given up in Hungary in favor of Media Markt, as well as in Belgium and the five stores in Turkey. One year later, the 13 Dutch locations were converted into Media Markt stores, and in 2015 the same was done in Italy. In 2018, Saturn wir in Poland was switched to Media Markt, and all 15 locations in Austria will follow in 2020. As of October 2020, there are still around 156 Saturn stores across Europe in only two countries: Germany and Luxembourg. According to its own information, the company still employs around 7,000 people in Germany.

Online retail competition

Amazon in particular is considered the largest competitor for Media-Saturn. Consumer electronics are now by far the largest group of goods on Amazon. Such a global player can generate considerable advantages in terms of conditions simply because of its size. “As a rough estimate, Amazon has already overtaken Mediamarkt Saturn’s total sales of 10 billion euros in the electrical appliances group, which includes marketplace sales,” says Gerrit Heinemann, e-commerce researcher and retail expert at the Niederrhein University of Applied Sciences.

2017: Split from Metro

In 2017, Media Markt Saturn Holding was spun off from the grocery store of the umbrella group Metro and electronics stores were placed under the management of the newly founded Ceconomy group. As a result of the split, the companies hoped for more growth and more stock market value, because Metro, as a conglomerate, was rated significantly worse on the stock exchange at the time.

The complicated shareholder structure prevented growth

For a long time, the success factor of Media Markt Saturn was the decentralized approach. This means that the branch managers are involved as shareholders, but of course also have a say in decisions. On the one hand, this ensured an active entrepreneurial spirit in the various locations for a long time, but it also prevented changes being implemented quickly, as decisions can also be blocked in this way.

2020: Announcement of an austerity program

This is exactly what the electronics retailer now seems to be planning. Only in August did the group announce a tightening of the austerity program. By restructuring from decentralized to centralized, the company will probably cut around 3,500 jobs. However, this decision does not have to be confirmed until the annual general meeting on Wednesday.

The savings plan also goes hand in hand with the thinning of the branch network. 14 deficit markets in the European market are to be closed.

According to retail expert Heinemann, however, that is not enough: “In order for Media Markt Saturn to survive, the branch network must be at least halved and the area reduced and realigned within five years at the latest.” At the same time, the e-commerce business must be expanded even more quickly and more strongly . “In the long term, I only see a chance for the company if the online share of sales is at least 50 percent.” It has been rumored in the industry for some time that only one of the two brands may survive in the future. If you look at the previous decisions of the corporate management, it can be assumed that, as in other European countries, the focus will be on Media Markt rather than Saturn.

This article has been updated with the results of the Annual General Meeting on Wednesday.

With material from the dpa

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