Expert sees existence in danger

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From: Anna Lorenzo

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Will Media Markt and Saturn soon disappear from the electronics retail landscape? An economist sees failures and worries about their future.

Munich – Media Markt and Saturn are only competitors at first sight. Because since 2017 they are both part of the Ceconomy group as the MediaMarktSaturn Retail Group alongside Deutsche Technikberatung. The change in consumer behavior is more of a problem for them than just coexistence. In addition to global players such as the online giant Amazon or the newcomer Coolblue, the group is increasingly struggling to secure its place in the consumer electronics market.

Economist Gerrit Heinemann, lecturer in business administration and trade at the Niederrhein University of Applied Sciences, said in an interview Business Insider, what the future of the more than a thousand branches looks like. And why Media Markt Saturn is now “about surviving naked”.

Media Markt Saturn: The group faces existential problems in the consumer electronics market

Media Markt Saturn seemed to be doing well. During the height of the corona pandemic, sales in their branches fell noticeably. It was not until the second quarter of the 2021/22 financial year that a slight recovery of 18 percent became apparent. However, the current economic crisis could soon bring the group to its knees. Ceconomy has already responded in the recent past by closing branches. According to Heinemann, the end of the electronic retail chains founded in 1961 (Saturn-Hansa) and 1979 (Media Markt) is now a serious risk.

“Sales”, says Heinemann, “is declining across the board and that has consequences for trade in almost all product groups”. However, the electronics sector has two disadvantages compared to other sectors. On the one hand, most of the products sold come from third-party manufacturers. Customer loyalty to private labels is therefore hardly possible. On the other hand, the competition is huge. For example, if you are looking for a smartphone, you can buy it from thousands of suppliers worldwide.

The comparison sparks a fierce price war, with stationary stores having to compete with online commerce. Amazon, in particular, is considered the fiercest competitor here. The e-commerce giant is not only able to offer customers completely different terms and conditions because of its size. As a result of its industry-less business model, Amazon also saves a lot of costs that would arise in area retail.

Media Markt Saturn: Expert complains about omissions in e-commerce and core competencies

But, as Heinemann emphasizes, Media Markt Saturn is not just a victim of circumstances. On the contrary, the group was unable to adapt to the changed consumer behaviour. On the one hand, according to the professor, the well-founded step towards e-commerce was missed. “With the arrogance of the market leader” they rejected Amazon Germany’s advice in 2003, shut down an online store that had been open for a short time – then put it back online in 2012 with no changes. Since “seven years in e-commerce” [aber] like 100 years in brick-and-mortar retail,” you “shot yourself in the foot” with this approach, leaving you behind the competition ever since.

In addition, the quality with which stationary retailers can score – namely advice – has been completely neglected. Retail competition is doing “significantly better” here, while Media Markt Saturn is undermining customer service independence by subletting retail space to manufacturers – which is financially relieved, of course. “Of course a Sony consultant would also like to sell me a Sony television”, Heinemann outlines an example. “As a customer, I no longer feel like I’m getting independent advice.”

At Media Markt and Saturn, discounts no longer apply as soon as new products go on sale © Sven Simon/Imago; Joko/Image; Collage: Sabrina Wagner/RUHR24

Economist Heinemann: Media Markt Saturn must now take these measures

In view of all these criticisms, it is also clear to Heinemann what needs to change at Media Markt Saturn so that the group has a future in the electronics industry. “It’s pretty clear that the problem is that the area is way too big,” says the economist. The immense area costs too much money and would not be used advantageously, rather it makes the branches “too confusing and therefore the”[n] Purchasing takes too much time.” The shortage of skilled workers can also be compensated by downsizing.

In addition, e-commerce must be set up and generate at least 50 percent of sales to remain competitive. This requires a centralization of the markets in order to be able to set the course uniformly and execute it on time. Marketing should also take a back seat in analyzing customer behavior as it only makes sense to adjust it accordingly. (ask)

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