Presentation of the opportunity situation
METRO GROUP has numerous opportunities to ensure long-term positive business development. Above all, these are due to the fact that we respond in a rigorous manner and at an early stage to the needs of private consumers and professional customers. Our key goal is to create value for our customers. As part of this work, we employ new sales channels and exploit the opportunities created by demographic trends and the increasing differentiation of the mature markets of Western Europe and population growth in developing and emerging countries. We analyse the relevant global and national trends and take decisions aimed at systematically exploiting opportunities in the future and creating competitive edges.
Opportunities from the development of business conditions
During the current financial year, we expect to see only a slight improvement in business conditions for retail.
Our sales and earnings could profit from the slightly improved business situation. Demand – including for the long term – is rising in countries with growing populations. METRO GROUP does business in many markets where we can benefit from this trend. In addition, we are continuing our selective expansion in the growth regions of Asia and Eastern Europe. In the process, we are focusing on business units and countries where we can build a distinct profile and strong market position. As a result, we plan to continue expanding our activities in China, Russia and Turkey as well as India.
The removal of bureaucratic barriers can help ease METRO GROUP’s entry into new markets. Trade between countries of the European Union (EU) and third countries with which the EU has concluded free-trade agreements (including Canada, Moldova, South Korea and Ukraine) or with which the EU is currently conducting negotiations (including India, Japan, the United States and Vietnam) could be conducted with no or limited customs duties. In our view, ongoing negotiations regarding an agreement to facilitate trade are also particularly promising. Imports and exports could be streamlined and the costs of international shipments of goods could be reduced by up to 10 per cent. For this reason, METRO GROUP welcomes the results of the Ninth WTO (World Trade Organization) Ministerial Conference in Bali in December 2013 and the decision of the 160 WTO members to conclude a multilateral agreement aimed at streamlining customs-clearing procedures and boosting the efficiency of the customs processes used by WTO member countries.
Strategic business opportunities
METRO GROUP’s sales lines have high levels of brand equity in the countries where they do business. We have assumed leading positions in many markets. We must further strengthen and expand these. Weaker market participants have withdrawn from the market, especially in countries that were hit particularly hard by the ongoing economic and financial crisis. We are working to fill these gaps or, when reasonable, to take over individual locations. Market exits of competitors would create additional opportunities for market share gains. In addition, we see potential in the successful repositioning of national subsidiaries operating in a challenging economic environment (including Germany and Southern Europe). The ongoing transformation and restructuring measures we have already launched aim to improve these companies’ market position and boost their profitability.
By optimising sales concepts, continuing to focus on core target groups and modernising stores, we are creating opportunities to win new customer groups and to bolster existing customer relationships. To this end, METRO GROUP continuously provides funds for investment. The company’s investment strategy is aimed at protecting and consolidating the competitive strength of all sales brands while addressing customers even better and in an even more targeted manner. Examples include a distinct intensification of our online activities and multichannel business, measures to strengthen our own brands, franchise concepts, investments in innovative sales formats and customer-centric services and solutions. In all sales lines, we see great opportunity in the sensible dovetailing of stationary and electronic retailing. In the cash-and-carry business, we see further substantial potential in the continued expansion of our delivery channel and in tapping additional professional customer groups. For Real’s business, opportunities are being created by the strategic transformation that is focusing on store refurbishment, the optimisation of the store network and a stronger customer orientation, among other things.
Online sales remain an important opportunity for our company’s future success. Online retail is experiencing strong growth. We still believe that this development will continue and project continued competitive momentum both in the stationary business and in online retail over the medium term. As a result, it is imperative for METRO GROUP to further strengthen its online sales channel. All our sales lines now have online shops in Germany and in many other countries. During the past financial year 2013/14, we continuously improved the online shops of Media Markt, Saturn, Redcoon, Real and Galeria Kaufhof. By doing so, we made additional strides in the shift from strictly stationary retail to integrated multichannel marketing. Unlike strictly online providers, we create real added value for customers this way. All sales lines of METRO GROUP are evolving into multichannel companies with the aim of becoming no-line retailers, that is, optimally linking store, online and mobile offerings. The dynamic development of information technologies creates opportunities for our company to optimise its own processes and offer its customers new solutions. Our first step in this area is to launch a pilot project to test the extent to which we can deploy an innovation at our company and to invest in interesting start-up companies. This approach ensures control over feasibility and security risks as well as risks related to the integration of these innovations into our existing systems. On the basis of its key strengths – name recognition, customer frequency, store network and purchasing power – the group focuses on five innovation areas in its drive to move the company forward:
- Store: offer products via mobile devices that had previously only been available online;
- Channel: integrate sales channels and continue to develop new channels: e-commerce, mobile commerce, food e-commerce;
- Marketing: individualise and improve effectiveness and efficiency of marketing and of customer relationship management/smart data;
- Logistics, supply chain and delivery: deliver the right products at the right time to the right place for the lowest price possible;
- New products and services: introduce and link new products and services.
These innovation areas are being fuelled in particular by information technologies that are more widely and easily used, including mobile communications (“mobile computing”), social media and cloud solutions. The implementation of solutions to process large amounts of data (big data) should create improved marketing instruments, more efficient logistics and an opportunity to introduce new products and services.
Demographic trends offer another tremendous opportunity for METRO GROUP. Ageing populations in Western Europe and the growing concentration in economic and cultural centres dominate our customers’ current and future needs. The stores of our sales lines are easy to reach and, as a rule, are located on the ground level. In addition, the outlets offer assistance and products designed to meet the needs of customers from all generations. As a result, we see good opportunities to gain additional market share.
Business performance opportunities
In addition to rigorously leveraging cost-cutting opportunities, we are creating a foundation for long-term success by increasing our productivity, especially through process optimisations. This effort includes a number of projects that we have already initiated and will now systematically continue to pursue. As a result, we will continue to expand our delivery activities and increase the share of high-margin own-brand products in total sales. Should we make more progress in the implementation of further productivity enhancements than we currently expect, this could have a positive impact on our business development.
In addition to cost components, quality and freshness are critical differentiating factors that are particularly relevant for food. By having employees who continuously check and ensure quality, we can gain an edge on our competitors and create customer perception that will have a positive effect on sales and earnings.
Additional opportunities will arise from efforts to cut our greenhouse gas emissions. Our climate protection goal will indeed require investments. But as a result of lower costs, particularly for energy, these investments will create savings over the medium and long term. These savings will result in financial and environmental benefits and improvements.
The operational activities of our real estate company METRO PROPERTIES were integrated into the sales lines on 1 October 2013 to ensure efficient processes and solid cooperation in the context of METRO GROUP’s current transformation. METRO PROPERTIES applies its expertise to the key value drivers in portfolio and asset management, project development and real estate sales. METRO PROPERTIES conducts regular benchmarking with leading real estate companies to ensure the delivery of best-in-class solutions for the group. In addition, the company promotes select project developments that help the sales lines to enhance their appeal to customers while raising the value of METRO GROUP’s property portfolio. These values are supported by active, comprehensive and intelligent real estate. Targeted transactions ensure that risks and opportunities in the property portfolio are carefully balanced. In this way, METRO PROPERTIES makes an important contribution to the strength of METRO GROUP.