BONN, Germany, May 28, 2015 /PRNewswire/ --
The looming takeover battle for Germany's beleaguered Kaufhof department store chain carries the risk of a "Walmart disaster revisited" should the department store chain fall into foreign hands, a leading retail expert has warned.
Professor Thomas Roeb, of the Hochschule Bonn-Rhein-Sieg, was referring to Walmart's failed foray into German retail. The U.S. giant bought into the German market in 1997 but failed to transfer its know-how to its newly acquired subsidiary. The nine-year attempt to restructure the German operations led to losses of an estimated 2.9 billion Euros and forced Walmart out of the market.
"Given the decline of the department store model, Kaufhof is a high-risk investment for any prospective buyer," Professor Roeb said Thursday.
"But history tells us it is particularly difficult for foreign companies that have historically struggled to understand the German consumer and the nuances of the German market," he added, citing, in addition to Walmart, the failure of Britain's Marks and Spencer, which closed its last store in Germany in 2001 after five years of trying to set up a viable business.
The battle for Kaufhof is expected to be between Austria's real estate and retail company Signa, the owners of German department store rival Karstadt, which has bid 2.9 billion euros ($3.2 billion), and Canada's Hudson's Bay, whose rival bid is believed to be imminent. Signa aims to merge the two chains into a German department store group called Deutsche Warenhaus AG.
Professor Roeb, who has worked in and for German retailing as a professor and consultant for 20 years, said while Signa would likely have a challenging time turning around Kaufhof, history shows that Hudson's Bay could face an even harder test.
"Retail is difficult the world over but in Germany price aggressive specialists have since the 1970s put the generalists under extreme pressure," he said.
"You can't just enter a foreign market like this one and expect to succeed and I think Kaufhof, under Hudson's Bay, risks becoming Walmart 2.0."
For the past decade German department stores have suffered at the hands of smaller speciality shops - especially in the area of clothing - while fast fashion specialists like Sweden's H&M or more recently, Ireland's Primark, have flourished at their expense.
SOURCE Department of Retailing & Distribution, Hochschule (University of Applied Sciences) Bonn-Rhein-Sieg