“There will be more branch closures” – With an Aldi comparison, an expert shows how bad things are with Galeria Karstadt Kaufhof

Bad news is nothing new for Galeria Karstadt Kaufhof. The department store chain has been in the headlines for years. Most of the time it’s about the money – more precisely, about the lack of money.

So also currently: Galeria Karstadt Kaufhof has filed for bankruptcy for the second time in just two years. A third of all 131 branches in Germany are to close, the company announced last week.

According to General Manager Miguel Müllenbach, the reason for this is the historically negative consumer sentiment. According to him, however, the general reluctance of customers to buy also plays a role. Because of inflation and the energy crisis, fewer and fewer people would flock to the inner cities.

Galeria Karstadt Kaufhof: “There will be more bankruptcies”

It is a development that affects Galeria Karstadt Kaufhof. And one that could continue. “There will be more bankruptcies and branch closures if the current insolvency proceedings go through,” says economist Gerrit Heinemann in conversation with CHIP.

He has been working as a professor for business administration, management and trade at the Niederrhein University of Applied Sciences in Mönchengladbach since 2005. Heinemann’s areas of focus include online retail, e-commerce and the future of retail.

He paints a bleak picture for Galeria Karstadt Kaufhof. “Current studies assume a maximum of 50 department store locations – primarily in metropolises or large cities with over 500,000 inhabitants,” says the economist.

Galeria Karstadt Kaufhof could therefore shrink even further. That would probably be a disaster for the group’s approximately 17,400 employees: many of them are already worried about their jobs.

According to Verdi, up to 2,000 jobs are at stake in Berlin and Brandenburg alone. The union wants to fight for every post, as Conny Weißbach, trade expert at Verdi Berlin-Brandenburg, emphasized in the rbb24 Inforadio. But that does little to change the tense situation.

Heinemann is not surprised that Galeria Karstadt Kaufhof is doing so poorly

Heinemann could foresee that Galeria Karstadt Kaufhof would be in such a bad shape one day. “The end of department stores has been discussed for over 30 years,” he says. “At the latest since the disappearance of Horten, Hertie and Kaufring, it has been clear that the life cycle of the department store has come to an end.”

Heinemann knows what he’s talking about. On November 1, 2010, he published a text entitled “The department store – a dinosaur with a future?” in the “Frankfurter Allgemeine Zeitung”. Already twelve years ago, the economist saw the business model “department store” as endangered.

“Further losses are inevitable,” he wrote. Heinemann was obviously right. Today he no longer believes in the future of the department store concept. “Perhaps a few more years in the form of an ailment, before sales are finally down to zero,” says the economist.

He is alluding to Galeria Karstadt Kaufhof. The group has recorded high losses in the past two years. In 2020/21, sales from the pure retail business were almost 1.85 billion euros, compared to 2.98 billion in the previous year.

For the 2021/22 financial year, the company management also expected an “annual deficit in the low to mid three-digit million range”.

Expert makes Aldi comparison: “That says it all”

Galeria Karstadt Kaufhof will disappear more and more from German inner cities, that has been clear since the announced branch closures at the latest.

In In Heinemann’s eyes, however, this development was evident long before the current bankruptcy. “Galeria Karstadt Kaufhof is no longer represented in most regional centers, i.e. cities with more than 100,000 inhabitants,” he says.

“An average Aldi branch already attracts at least twice as much traffic as an average Galeria department store. That says it all.” Online shopping is also booming.

Data from the Federal Statistical Office shows that 82 percent of all Germans shopped online last year. They mainly order clothes online. Even if there are of course consumers who still like to go shopping in department stores.

“As a retailer, I have to offer an experience”

And some cities very much regret the closure of individual department stores. “The Karstadt is missing,” said Frank Helmenstein recently in an interview with the “Tagesschau”. He is mayor of the 50,000-inhabitant town of Gummersbach. A Karstadt branch closed here two years ago.

Oliver Janz, Professor Handel DHBW Heilbronn, believes that the “department store” model will ultimately only have a future if some things change.

“As a retailer, I have to offer an experience. I have to offer advice. I must have extraordinary assortments. And unfortunately Galeria Karstadt Kaufhof doesn’t have all of that at the moment,” he told SWR.

An opinion shared by Heinemann. In 2010 he wrote: “Due to their almost identical profiles, the department stores are hardly distinguishable for the customer.” He is probably still right today.

The original of this article “With an Aldi comparison, an expert shows how bad things are with Galeria Karstadt Kaufhof” comes from chip.de.