Over the review period, department stores was one of the channels most affected by structural changes in the German retailing landscape and the way today’s consumers shop. With internet retailing accounting for an increasing share of sales of many product categories, particularly those commonly sold in department stores, notably apparel and footwear and consumer electronics, the channel has seen some of its sales lost to online retailers.
Besides internet retailing, another factor negatively impacting the performance of department stores is the increased competition from variety stores with a budget positioning and from off-price apparel and footwear specialist retailers, such as TK Maxx. Strong competition from rapidly expanding off-price apparel specialist retailers will limit the potential of discount strategies to drive significant growth for department stores over the forecast period.
One of the primary targets for German department stores is to increase the attractiveness of the stores. Both Karstadt and Kaufhof still possess prime retail locations but many of their stores are outdated and not adjusted to customer specifications, as well as being too large which puts pressure on sales per selling space.
After only three years, Hudson’s Bay Co decided in 2018 to merge Kaufhof and Karstadt to create a new holding. Austrian Signa Holding will own the majority share in the new holding, while Hudson’s Bay will hold a minority stake in the business.
The new holding and both department store brands will have to focus more on their respective customers and their needs, in order to compete with the rising competition. Besides the strengthening of their multichannel concept, both Kaufhof and Karstadt want to attract younger consumers and tourists back.
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