What are some high-margin refurbished markets

"Customers buy the wrong products on the Internet"

Will the parcel deliver deodorant, cream and toilet paper soon? Experts predict that. The drugstore giants are still hesitant about the business models behind them. Because the return is not right.

Share this articleDirk Roßmann does not hesitate long with his assessment of the future topic of online shopping. "Customers buy the wrong thing on the Internet. There they buy Pampers diapers and coffee and toilet paper - and all those products where we have no margin," says the pioneer of the drugstore chain system in this country. He is critical of the hype surrounding the online channel. When shopping in the store, the mix is ​​different because customers also put high-margin items such as a hairbrush in the shopping basket.

However, industry experts predict that the world of goods from Rossmann and the German market leader dm will go online. Customers expected it to be as cheap as it was offline - margin or not.

According to the Cologne Institute for Retail Research (IFH), the German online trade in body care and cosmetics alone has more than tripled since 2008 to a turnover of 800 million euros. Established retailers with branches account for a good half of this. The perfumeries as well as department stores benefited in particular. "In contrast to the overall market, drugstores still play a minor role online," says Susanne Eichholz-Klein from the IFH. But that will change soon.

Strategic importance

The consulting firm EY (Ernst & Young) also predicts that online channels will be of strategic importance. According to the EY forecast, it is not only the online share of the important food market that will grow breathtakingly from 0.3 percent in 2014 to 10 percent. Drugstore articles would grow even faster, says EY partner and retail expert Wolf Wagner. "The rigid shopping behavior is noticeably dissolving." However, these prospects would force the industry giants to take action.

"The food retail trade and including the drugstore segment are facing a revolution with online sales, not an evolution," emphasizes Wagner. The branches would remain the most important building blocks in retail. "But they will look different." Wine and books have already taken these steps of development.

For the industry, it is not only important to equip online presences for the shopping experience and to create logistics solutions, but also to interlink branches and the Internet. "One of the topics here is 'click and collect', that is, ordering online from home or on the go and collecting it from the branch," says Wagner.

The problem of mini-margins in the network

Roßmann says that the basic problem of mini-margins for products ordered online with their logistics costs has not been resolved. "But I'm not saying that the Internet has no future. We will do many things differently and we will do many things better." His junior Raoul Roßmann, who moved up to the management in autumn and is responsible for purchasing and marketing, says: "There are a number of reasons why the consumer goods sector is not working today."

Logistics costs, selection and the shopping experience in a store were among them. "But online is of course still interesting because you can use it to convey a culture of service and branding." Therefore the internet channel has an importance "but a relative one".

Industry experts estimate Rossmann's online sales at 50 million euros per year. According to the latest publicly available key figures, it was 32 million euros in 2012. On the earnings side, 2011, 2012 and 2013 together resulted in a loss of a good two million euros.

"We will also have success on the Internet at some point. But whether in three years or in five, I don't know," says Roßmann Senior. Junior Raoul reports: "At the moment we are again increasingly focusing on online." The management of the Internet subsidiary was exchanged "a few weeks ago". The division should be closer to the headquarters.

dm drugstore is also entering online trading

Rossmann's biggest competitor, dm, is currently planning the big hit: After long hesitation and a failed attempt with Amazon, the German industry leader is currently building its own online shop. Almost the entire dm range should go online in early summer.

Regardless of online, dm and Rossmann continue to drive their branch growth in Germany. "Germany is already pretty tickled," says EY industry expert Wagner. One trend is the presence in prime locations in city centers. "The companies don't do that because they like to deduct high rents, but because it is essential for survival." Rossmann, for example, develops up to 20 of its own properties in Germany every year and closes around 70 small shops, but opens around twice as many large ones.

This means that the industries are involved in a balancing act: the number of branches is growing, but sales per square meter could suffer noticeably if the online piece of cake actually increases significantly. That, in turn, could have a major impact on stores' profitability threshold.


The trade 02/2021

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