Off-Price Outlets Shopping Shift in Store for Kaufhof

Under Hudson’s Bay Company, new designer outlets will target German shoppers with “off-price” luxury goods in lavish settings.
A Saks Off 5th store near Toronto.

When Hudson’s Bay Company acquired the Kaufhof department store chain in June 2015, chief executive Jerry Storch promised his new German employees that “Cologne would be the capital of HBC in Europe.”

But many Kaufhof workers were skeptical about what the Canadian retail giant had in mind for its new German division.

The nearly 350-year-old Toronto-based conglomerate, known as HBC for short, also owns U.S. department store chains Lord & Taylor and Saks Fifth Avenue, in addition to its main Hudson’s Bay franchise in Canada.

The concept fits the mentality of German shoppers perfectly: extremely high quality at low prices. Jerry Storch,, HBC chief executive

Now HBC is following through on its ambitions for Europe, a year after it bought Galeria Kaufhof stores from the German retail group Metro for €2.8 billion, or about $3.2 billion.

By next summer, HBC plans to open its first five German branches under its designer outlet brand, Saks Off 5th. And the retailer’s European headquarters will also be in Cologne – under one roof and closely intertwined with Galeria Kaufhof.

The flagship outlet will be in Düsseldorf, at Heinrich-Heine-Platz in the storied Carsch-Haus. The store, which was previously operated by Kaufhof, will be extensively renovated. Designer fashions, accessories, shoes and household goods will be offered over 3,500 square meters.

 

Galeria Kaufhof Hudson Bay Co Difficult Business-01

 

As is usual at outlet stores, the merchandise will mostly come from overproduction or the previous season. But some luxury brand articles will be produced expressly for the outlets.

“The concept fits the mentality of German shoppers perfectly,” said Mr. Storch. “Extremely high quality at low prices.”

The basic idea – called “off-price” in the United States – was introduced in Germany by European competitor TK Maxx. But Saks Off 5th plans more luxury in presentation and the goods themselves.

For now, HBC believes there is potential for 40 Saks Off branches in Germany. By comparison: TK Maxx already has 80 stores and opens about 10 more each year.

How seriously HBC takes the competition is evident in its hiring and top people. It wooed the new head of purchasing for Saks Off, Berna Bartosch, away from TK Maxx, for instance.

And the chief executive for Saks Off Europe will be an HBC veteran: Wayne Drummond previously worked for the company for 30 years at various positions in North America.

More Saks Off stores are slated for Frankfurt, Stuttgart, Heidelberg and Wiesbaden – in renovated locations of the Kaufhof subsidiary Sportarena.

In the meantime, the Sportarena brand will disappear. Sports equipment stores are not as profitable as Kaufhof and, because of competition, have little opportunity for growth, Mr. Storch explained.

All employees at the Carsch-Haus and Sportarena stores are guaranteed employment in similar positions, either at Saks Off or at Galeria Kaufhof.

In the United States, HBC already has more than 100 Saks Off stores, and the brand was recently introduced in Canada.

“We believe in the future of good department stores,” said Mr. Storch. “We intend to become one of the largest department store companies in Europe.”

The Saks Off 5th brand will be introduced in the Netherlands at the same time. It will complement the 20 department stores that HBC is planning there under the Hudson’s Bay brand.

The Netherlands stores will also be managed from Cologne.

 

Florian Kolf leads a team of reporters covering the retail, consumer goods, luxury and fashion markets. To contact the author: [email protected]