Step inside love: Makro wants to sweetheart lost customers back and to win the hearts and wallets of new ones
It has been great fun teasing the top brass of Metro AG since the demerger of Dusseldorf-based Metro Group in July 2017. But this belies the efforts of a solid stratum of middle managers, supported by many surprisingly loyal employees, who keep the company going from day-to-day.
Metro enjoys a variety of fortunes within its international portfolio. Despite some withdrawals in recent years, this still numbers an impressive 25 countries. One of the most challenging is Belgium where the group continues to haemorrhage money. With net sales stagnating at €846m, losses jumped to €107m in the business year to September 2017– the third decline in a row.
Metro Belgium runs six ‘Makro’ and eleven ‘Metro’ cash & carry stores focussing on the end consumer and professional HoReCa, respectively. The problem child is Makro where the company has just announced a relaunch with a “new commercial approach” aimed at gaining 45,000 new customers annually.
This ‘Value Creation Plan’ is all very well, but there have been numerous such experiments in the past. So why should this one be any more successful? Country manager Vincent Nolf is sanguine…
“We have to focus on our DNA“
Vincent Nolf, President, Metro Belgium
Mr Nolf, Makro has been in difficulties for several years now in Belgium. Why do you think this is?
We have great store locations, but this is obviously not enough. A gradual decline in customers has impacted turnover and, subsequently, financial results. Turnover has also been affected by the sale of our petrol stations and the transfer of our consumer electronics business to Media Markt during 2017.
But the integration of Media Markt as a shop-in-shop concept doesn’t seem to have helped your turnaround. Where was management thinking flawed on this?
I still believe the decision as such was the right one. Makro was losing relevance in consumer electronics. Investments were not paying back in this segment. However, we wrongly assumed that Media Markt would attract customers from remote areas when other Media Markt stores were sometimes closer to them.
Why have customer numbers been declining overall?
Makro now partners with consumer electronics specialist Media Markt
Makro Belgium lost focus on its DNA, which one can define as a professional assortment, big packs, such as 5kg packet of Bolognese sauce for scout camps, exclusive offers you can’t find anywhere else, and bargains.
We also lost focus against a backdrop of increasing competition. Customers were no longer able to differentiate us from other retailers, many of whom are also closer to customer homes than our stores.
How come your own sister company, Metro, has increased market share in Belgium over the last three years?
The concept has a clear profile. It is oriented towards B2B and specifically geared towards the HoReCa sector. Metro’s products for professionals are distinctive and have focused on our ultra-fresh & frozen competence. Here we were able to draw on the expertise of our international buying offices.
We will also add new store design and local assortment elements.
If Makro is your problem child and Metro still has a chance, why not simply sell Makro?
We believe in our new business plan, which includes both Metro and Makro. We have already started to implement our new commercial strategy for Makro. Although it will take several years before all the benefits of the new strategy can be reaped, first results will soon be visible. 2019 will be the decisive year for our new Makro strategy.
So how is Makro going to win customers back?
We must restore what we call our historical DNA. Our plan for Makro is an assortment for professionals in large volumes and with differentiated offers that you cannot find elsewhere.
Enabling end consumers to ‘buy like a pro‘ will make a commercial difference. We will give hobby cooks, for example, access to ingredients used by Michelin chefs.
This approach is also reflected in our non-food assortment with, for example, kitchen sets for pros.
Blue and yellow corporate design: One of six big Makro cash & carry stores in Belgium
Another important customer group for Makro are traditional SCOs (Service, Companies, Offices) as well as associations and sports clubs. They buy partly for their own businesses and partly as end consumers.
We will also focus our assortment on the needs of local residents. There are many inhabitants of Italian origin living in Charleroi, for example, so we will offer more Italian specialties at our Makro store in Lodelinsart. These products will be sourced through Makro’s sister company Metro in Italy, which makes our offer unique on the Belgian market.
Last but not least, we will introduce new store design elements that make daily shopping at Makro easier. These include, for example, a fast track which should enable shoppers to do their shopping in only 15 minutes.
Belgian unions LBC and ACLVB dread your restructures because they often come with redundancies. They fear that your new ‘Value Creation Plan’ will lead to at least 500 job losses. If you want union support, how can you allay their fears?
Our new plan is not a restructure, but a commercial strategy that aims to get former customers back to our Makro stores and to attract new ones. We need a strong and committed team to achieve this. There is no social plan involving redundancies at this point. We cannot predict the future, but for now we want to focus fully on the new business plan that was worked out in close cooperation with our employees.
Your Belgian operations have undergone several restructures over the years. None of these have led to a sustainable turnaround, why will your ‘Value Creation Plan’ be any different?
Playing to one’s stengths: Ultra-fresh F&V
We have learned from the past and the mistakes we made by moving away from our DNA. Previously we were obliged to try a new strategy in order to stop the decline in sales. But it is now clear that this approach did not work. So we have to refocus on our historical DNA.
We have involved our teams – management as well as staff – in thinking about the plan and everyone will be closely associated with its implementation.
I am also happy to announce our ‘lab store’ in Deurne – here we have the chance to test new concepts and innovations before implementing them in our six Makro stores.
Whatever your new plans are, isn’t the brutal reality that your store concept passed the zenith of its lifecycle long ago? Why should consumers or even professional traders want to shop in a Big Box any more?
Of course, customer requirements have changed significantly. This implies great challenges for the whole retail and wholesale sector. The most prominent developments are obviously e-commerce and home delivery. From the perspective of customers, who can now buy everything online, why should they make the effort to drive to a store?
Makro Belgium: In wine as in many other segments Makro can draw on its international buying structures
But I believe physical stores still have their raison d’être. They offer personal encounter and human interaction with store staff as well as advice and ideas. Customers are also able to see, smell and touch the ingredients for their dinner. This is where we can make a difference for them and where we must continue to improve our performance.
At the same time it’s crucial for us to keep up with new developments – as Makro does, for example, with its e-shop, which is working well. Also, we will invest in our delivery capabilities and extend customer services ‘outside the box’ in order to ensure the highest level of customer convenience.
So we strongly believe that there are good perspectives for big ‘box’ stores and ones in our corporate blue colours too!
Read in German: ‘Makro-Belgien baut um‘ by Mike Dawson on page 10 of Lebensmittel Zeitung, no. 26, 29.06.2018