Virtual Selling Media-Saturn Invests Online

Pieter Haas, the head of electronics retailer Media-Saturn, discusses changes at the chain and survival in the Internet age.
Media Markt aims to help customers fully digitize their homes.

Few managers are under as much pressure as Pieter Haas, the head of electronics retailer Media-Saturn. Minority shareholder Erich Kellerhals called for his resignation but the company’s recent growth seems to have given the CEO confidence to carry on.

 

Mr. Haas, in the important quarter leading up to Christmas, your revenues climbed a good 4 percent. Is that the big turnaround?

Pieter Haas: It is positive, and I'm proud of what we have achieved. But I’m still not satisfied.

What bothers you about growth?

Of course I’m pleased about it. Germany is one of the markets where we made significant progress with one of the strongest final quarters in years. And we also benefited from special circumstances in Russia – with the ruble in free fall, people went on a spending spree. But that won’t happen every day.

A year ago, headlines read “Media-Saturn Slowing Down Metro,” your majority shareholder. Recently, it looked more like “Media-Saturn Rescues Metro.”

It's an exaggeration to say we're Metro’s saviors. But we've turned our public image around and we're back on the offensive.

After a period of paralysis.

Just imagine how it was for the company. It was successful for decades, and everyone thought they could fly. Then came digitalization and the Internet, and that optimism was shaken to its core.

What are you expecting in the current year? Will there be an upturn?

We started growing in the second half of the last business year. This has continued in the first quarter, and it looks like the trend will carry on in that vein. On the earnings side, we're also moving in the right direction.

Profit fell by half in the last three years. Will you ever be as profitable again as you were in the past?

The world has changed, with lower costs of online business cutting profit margins for the entire industry. Prices are more transparent.

So the good times are over – no more big profits?

Media-Saturn is in excellent shape and has never reported a loss. We want to keep that going, although retailers and producers are both putting pressure on profits. In the mid- to long term, we want to return to profit margins like we had in the past.

Where's the growth coming from?

Many places. Attractive new products like curved high-definition TVs are certainly benefiting us. People are also coming into our shops to see new computer products. On a regional level, we see that Spain, for example, is slowly emerging from crisis. And that consumers in the Netherlands are eager to buy again.

So you had nothing to do with the turnaround?

Of course, we've also done a lot internally. We focused intensely on networking distribution channels. You can now reserve a product on the Internet and then go around the corner to a local market to pick it up and pay for it. We used to separate inventories – now we can tell clients exactly where a product is in stock. We're currently running a trial to deliver goods ordered online the same day, even at a requested hour. We're implementing this in 20 towns, in more than 80 stores in Germany.

 

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Do you have enough capital to invest?

Yes, we keep investing €300 million each year. Fortunately, cash isn't a problem for us, and we have always had sufficient liquidity even in more difficult times.

Where does the money go?

Every store is renovated, on average, every three or four years. Then a great deal of money goes into IT, logistics and marketing. We have to cover the whole spectrum from mass communication to appealing to individuals.

One of your stated goals is to generate 10 percent of revenues online – about €2.1 billion. When will you achieve that?

You asked before about factors driving growth, and online is one of them. And not just Redcoon [online electronics retailer in the Metro Group]. We also have the Saturn and Media-Markt online shops, which have a far bigger range of products than before. At the current annual growth rate of 30 percent, it should take another 18 to 24 months to reach our intermediate goal of generating 10 percent of revenue online.

And then?

In the long term, one-fifth of all retail trade will be conducted via the Internet. I’m convinced that we too can reach 20 percent.

Will traditional markets take a backseat?

On the contrary, the markets will still be important. We're working on new concepts to improve customer loyalty. One idea is a databank where our customers agree to record all their purchases. Then we could always help them when they need support. For example, when the software on their router no longer works. Or when an update makes everything crash, or they need spare parts. We could help them set up a 'smart home,' to network all their technical gadgets.

Would that be a wholly new role for an electronics retailer?

Yes, we'd be a kind of beacon for the electronics world. We would always be there for the client.

There has been a long-running conflict between your shareholders over who has control of Media-Saturn. What’s happening now in that dispute?

My job is to take care of the business side. I don’t get involved in what goes on between the owners, so I can’t and won’t comment on that. But whatever happens, one thing's for sure – our best years are ahead of us.

 

Joachim Hofer covers the tech and IT sectors from Handelsblatt's Munich office. To contact the author: [email protected].