Professional development program: Germany retail management tour, March 2017

Many people know that Germany is one of the most developed and multifaceted countries in the world. German retail has reached a really high level, and this country’s top companies are ready to share their priceless experience.

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Our tour participants got the opportunity to gain some knowledge of the specifics of German retail from such companies as Audi, Netto, HIT, Edmon’s, Tchibo, Biomarkt, Andritz Gouda and Fromatech.

Day 1, March 1, 2017

Our tour began with meeting Professor Bernd Halier, a retail expert and head of the European Institute of Trade as well as chairman of the European Retail Association.

This meeting was very special, as the participants had an opportunity to visit the Professor’s house in a fashionable suburb of Cologne, among impressive forests. In a special auditorium, which had been a bunker, we have learned all the secrets of German retail.

All main players on the retail market can be classified according to different criteria, such as shopping floor space, location, assortment, product presentation, service etc. According to these criteria, the German market’s leader is Aldi, and there are several reasons why.

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It was interesting to learn that this retail chain has both a ‘regional’ administrative system (shop directors elect a regional director) and a ‘central’ one (80% of assortment are dictated by the head office).

Competitors, unable to top Aldi’s pricing policy, use other factors of attracting customers, such as, for example, attractive layout (especially in the ReWe chain).

Our tour participants were interested in very different topics: from financial (crediting) to operational ones, like turnover or logistics costs. Speaking about costs, it’s interesting to mention that at discounters personnel costs are only 7%, and at supermarkets – 15%. The Professor had answers to all of our questions, even the most difficult ones, like, for instance, the product profitability – layout ratio. Bernd Halier started studying this question way back in 1988, and was one of the first people to do so.

The tour continued with visiting Netto, a discounter chain, part of Edeka Group cooperative. Netto’s concept is based on selling well-known brands at reasonable prices, that’s why they have much less private label. The tour participants were interested in distribution, which is national-level-based, as well as category management and turnover ratios.

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Our next stop was at a ReWe supermarket, one of Germany’s retail leaders. It was very interesting to learn how product layout is predetermined by technical details, like, for instance, power sockets: the meat department was close to the power sockets, and on the way to it the customer can find salads, vegetables and other associated goods. It was also very enlightening to learn about the discount payback system, according to which part of the money spent at the retail chain’s shops can be returned as bonus points or special events like e-coupons. The tour participants have also noticed some clever ways of product promotion with special advertizing shelves, without the help of personnel.

After taking a snack at ReWe’s bakery, we went to Lidl, one of the largest discount chains. The assortment at the discounter we visited included 2000 positions and was laid out in a traditional format: boxes and cardboard boxes. During the tour we have learned about the used promotion forms, competition with Aldi and other special features.

Next to this discounter was a shop belonging to the abovementioned Edeka cooperative, a full-assortment supermarket. The participants were especially interested in the fish department and its functioning: we learned that 7% of waste was put into the retail prices, but this particular shop never had more than 5% of waste due to the right layout and presentation. Next day we learned more about this chain, so at first we just had an introductory tour.

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To end such an enlightening day, we visited the HIT chain, whose motto is “Really plentiful” – and it’s proved by its wide assortment. After meeting the shop director, the participants learned many secrets of this supermarket chain. Its client service is based on 7 principles, like “quality guarantee”, “return guarantee”, “origin guarantee” (the most attention is given to regional and local products), “freshness guarantee” and the most important principle, “priority guarantee”, according to which the chain managers give attention to all customer feedback at any level.

All 92 supermarkets belonging to this chain have a large shopping floor space (2500 to 5000 square meters), and a large parking space (150 places). It’s interesting that the chain is allied with ReWe: they buy products together and have competitive prices due to low buying prices.

Day 2, March 2, 2017

The second day of our tour started at the weekly farmer’s market in Bergisch-Gladbach, a small town famous not only as the birthplace of Heidi Klum, but also for its industrial past: before the XX century it was one of the most important iron mines in the country. Our participants were interested in the bioproducts at the market. Farmers sell it not only here, but also via online shops.

Having visited the market, we went to the Merzenlich bakery and confectionery, which has 50 shops. Here, the shop’s employees explained the secrets of its great service and active personnel. The bakery’s assortment is very wide: freshly baked bread, cakes, rolls, cupcakes and many other products.

Then we went to see the Reformhaus retailer, which sells not only food, but also biomakeup and household goods. This chain’s products adhere to high ecological standards. We were given a tour by the owner of two shops out of eight, who explained how a cooperative works. The assortment is chosen individually by every separate shop. The participants were interested in the logistics of such a small chain. It buys products off of two wholesale suppliers. Some goods, such as makeup, are sent by post. Orders are made via special software.

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Then we made a short visit to the Edmon’s supermarket chain, selling 350 kinds of tea all over Germany, and the Tschibo shop, which is known mostly for its instant coffee, but in German shops of this brand you can also find clothes, household goods and even household devices.

Next in our tour was visiting Biomarkt, a healthy food chain with ecological products. The shop’s director explained all the aspects of his work, from shifts and work environment to assortment. We were impressed by professional development programs for employees, which allowed them to apply for a category or regional manager post after some time, as well as the social aspect of the company’s activities, such as its close partnership with food sharing organizations to reduce waste. By the way, employees are also allowed to take home products with running-out expiry dates on Saturdays. Sales events are set up by both the central office and suppliers: they can include both new products and seasonal goods.

Our productive day went on at Kaufland, a German hypermarket chain. We have visited a very large hypermarket with 4000 square meter shopping floor space, 120 employees and a 30 000 000 Euro turnover. All shops of this chain are being fully modernized to make more space for customers, wider passages, see-through passages allowing to see more than one row of products, and also serving goods on modern trays, like at the Lidl discounter, which is also a part of Schwarz Group. We have seen how efficiently the shop’s 200 square meter storage works, learned some merchandizing secrets, saw many new products (3000) coming to this shop annually and were pleasantly surprised to see shelves of Eastern European goods.

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Our second day ended with an Edeka shop. Here, the participants learned more about the annual stock-taking and merchandizing, as well as internship for students of technical colleges and specialized schools who visit the shop once every two weeks and do the layout at a particular shelf. These activities are strictly controlled by the shop employees, including the director who gave us the supermarket tour.

Day 3, March 3, 2017

On our last day here, we visited Germany’s neighboring country – the Netherlands.

The day started with visiting the Andritz Gouda company, supplying complex technological solutions for food industry. The company’s factory is situated close to the Gouda town famous for its cheeses. Here, the participants saw the process of using roll dryers for making cereal-based drinks, proteins, steam cleaners and complex food products. We were most interested in the equipment used for peeling and drying potatoes, starch and different mixtures.

Then we visited the historical town of Gouda and went to one of the well-known cheese shops, where you can buy large 12-kilogram cheeses: this is how this cow-milk cheese was first manufactured.

To end the day, we went to the south of the Netherlands, namely, to Eindhoven, to visit the Fromatech Ingredients factory which makes food additives, concentrated foods and spices. Here we learned about all the production stages and quality control for such goods as thermally stable flavoring agents, complex food additives, flavor boosters, spice extracts, food coloring and emulsifiers.

The tour participants learned the secrets of some of the world’s largest companies first-hand.

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