According to various media reports, Galeria Karstadt Kaufhof (GKK) is again negotiating with the federal government for state aid over a three-digit million amount.
At the beginning of the year, the company, which loses around 100 million euros with every month of lockdown, received a subordinated loan from state funds of 460 million euros.
The second loan would be burned money, says economist Martin Fassnacht to Business Insider, because GKK’s concept of the department store is outdated.
–Germany’s last large German department store chain needs government aid again. Last week it became known that Galeria Karstadt Kaufhof (GKK), according to information from „Manager Magazins“ I am negotiating with the federal government about a possible further state loan of 200 million euros. The ailing department store chain had already received a subordinated loan of up to 460 million euros from the state economic stabilization fund (WSF) at the beginning of the year.
In the eyes of some economists, this step would be a mistake. “I would find it unbelievable if the state grants GKK another loan. That would be burnt money that the state will never see again, ”says economist Martin Fassnacht in an interview with Business Insider. The professor of strategy and marketing at the WHU Otto Beisheim School of Management no longer believes in the salvation of GKK. The form of operation of the department store has outlived itself and no longer has a right to exist.
Fassnacht is certain: “In five to ten years at the latest, GKK will no longer exist.” “This is not good news for the employees and I am sorry to have to say this so drastically, but the GKK concept is no longer viable.”
GKK has a stronger competitor in every segment
30 years ago, a large range under one roof was a unique selling point. In the meantime, however, the retail sector has fanned out. “I see neither the USP (Unique Selling Point) of GKK as a whole company, nor in the individual product segments,” says Fassnacht. Be it Douglas in the Beauty segment or MediamarktSaturn in the Electronics segment: GKK now has strong (online) competition in each segment, which is much better positioned.
In addition, more and more customers are buying online. The corona crisis only accelerated this development. However, GKK has slept through digitization for years. Most recently, the online share of sales at GKK was just 4.3 percent. “That is almost nothing and is not enough to continue to hold its own against strong competitors such as Amazon, Zalando or Douglas,” says Fassnacht.
Fassnacht suspects a strong political motivation behind the state aid to secure jobs in the election year. In any case, the investment cannot be explained economically, according to the economist. A look at the figures is enough, because GKK has not really run smoothly for almost a decade: In 2008 Karstadt alone had sales of 4.1 million euros a year, Galeria Kaufhof 3.22 million. The last known figures from 2019 show a total turnover of only 4.9 million euros after the merger of the two chains – and since the corona pandemic this number has probably fallen drastically again. As the GKK managing director Miguel Müllenbach told the “Bild” newspaper, the company is losing around 100 million euros a month due to the ongoing lockdown and the associated branch closings in many regions. The number of locations also fell from 210 in 2011 to 172 in 2018. In the course of the protective shield proceedings into which the company took refuge last year, GKK closed a total of 41 branches.
Other renovation experts are also skeptical of GKK’s future viability
Fassnacht is not alone in his critical stance towards state aid for GKK. The insolvency administrator and restructuring advisor Dirk Andres also criticized the first loan in an article on the LinkedIn career network: “It is […] It is unbelievable that a department store group is given such massive support while many small and medium-sized businesses and chains without a lobby, which in total certainly have a similar number of employees, fall by the wayside.
Even the former general representative in the GKK protective shield proceedings from last year, Arndt Geiwitz, expressed doubts about the future viability of the company. Geiwitz said to that “Manager Magazine”: “Galeria Karstadt Kaufhof, as we know it today – with monotonous gastronomy and a poor room layout – is not viable in the long term.” In the long term, Geiwitz still sees potential in the department store chain, she must now invest and implement the future plan planned before the lockdown . Otherwise “death in installments” threatens. The planned future concept provides for a more regionalized range as well as a pop-up store culture, modern gastronomy concepts paired with various services in order to attract a younger audience.
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