Real

A comprehensive range of food and non-food products, high-quality fresh items and attractive prices: all this makes Real one of the leading hypermarket companies in Germany. Its aim is to provide customers with the best shopping experience as a result of its product expertise, variety, attractive prices and modern stores. The sales line operates 307 stores across Germany, including two drive-thru grocery stores as well as the Real online shop. Its business in Turkey was acquired by Hacı Duran Beğendik during the reporting period.

Real’s hypermarkets have between 5,000 and 15,000 square metres of selling space. These stores offer customers products that cover all their daily needs under a single roof. Real generates three quarters of its sales with food items. The centrepieces of its product range are fresh foods, including fruits and vegetables, meat, sausage, fish and cheese. Real also offers a wide range of non-food items, including electronic devices, household products and textiles. Up to 80,000 different items are available in every Real hypermarket. In response to customers’ changing shopping habits, Real has more closely dovetailed its stationary retail operations with its online business. As a result, the sales line can interact with customers on a cross-channel basis both in stationary retail and online.

Our sales line continues to systematically employ the strategy it devised at the end of 2012. This strategy addresses every business segment at Real and covers six focal points: customer orientation, marketing efficiency, multichannel operations, supply chain management and purchasing, operational excellence and new organisational structures/corporate culture. Each of the projects described below must make a clear contribution to one of these focal points.

Successful transformation

In 2014, Real systematically continued to carry out its strategic transformation. In the process, it reinforced and expanded new structures and processes. At the beginning of 2014, all business operations conducted by Zweite real,- SB-Warenhaus GmbH, including the stores, were spun-off and transferred to real,- SB-Warenhaus GmbH. Since then, the 64 stores have been integrated into the Real store network. This step reduced administrative complexity.

To keep the company on its successful course, Real took far-reaching modernisation steps during the reporting period and examined its store network. As part of these considerations, a decision was taken to close 16 stores – partially due to a lack of business opportunities and partially due to expiring leases that contained no extension option. At the same time, Real bolstered its profitable stores: in Göttingen, Kulmbach and Regensburg, METRO PROPERTIES acquired the properties from Redos Real Estate GmbH. In the process, the leases with Real were extended ahead of schedule. Furthermore, METRO GROUP acquired ten stores from the Delek Group of Netanya, Israel. These stores are located in Bremerhaven-Pferdebade, Castrop-Rauxel, Groß-Gerau, Darmstadt, Freiburg (Gundelfinger Straße), Heidenau, Würzburg (Nürnberger Straße), Wetzlar, Raunheim and Wiesbaden (Mainzer Straße). This acquisition will facilitate an orderly structuring and systematic development of the store network.

Far-reaching changes were also made in the entire supply chain operation. As a result of a logistics system that has been adjusted to the inventory turnover of individual product groups and a higher central warehouse share in the dry goods range, incoming deliveries will be sharply cut and costs will be lowered. At the beginning of financial year 2014/15, the transfer of ownership of the warehouse inventory from METRO LOGISTICS to Real took effect. Altogether, the changes will significantly improve product availability in stores. Thanks to lower costs throughout the entire supply chain, efficiency will also be improved. In addition, inventories in the central warehouse and in stores will be significantly reduced.

Store refurbishment

The new concept implemented at the Real hypermarket that opened in October 2013 in Essen has been a success: between November 2013 and August 2014, sales climbed by more than 15 per cent and the number of customers increased by more than 25 per cent. For this reason, our sales line modernised 30 more stores in the first half of 2014 on the basis of the Essen concept. While the focus of the food section was primarily placed on sales campaigns and seasonal displays in the entryway, new non-food concepts have been designed to set Real apart from its competitors. All product areas have been better geared towards changed customer habits: the layout of product sections and departments is increasingly based on customer behaviour while searching for items. The stores now seem bigger and more clearly organised thanks to wider aisles, an open central corridor and lower shelves. The altered assortment structure and product location as well as new services that include free Wi-Fi significantly increase customer value. Positive feedback and increased customer frequency in the refurbished stores prompted Real to introduce the new concept at 20 other hypermarkets in the fourth quarter of the reporting period. A large number of other stores are scheduled to follow in financial year 2014/15.

New concepts involving fruit, vegetables, textiles and drugstore items are helping to boost the attractiveness of our hypermarkets: the new fruit and vegetable concept “Milano” that has been added to 185 hypermarkets is based on modular components that are broken down by the areas of organic foods, regional products and exotic items. Handwritten product signs evoke the feel of a weekly market. The changes have had a positive impact on the number of customers, average transaction value per customer and thus sales: some stores with restructured fruit and vegetable departments recorded double-digit increases in sales during the first weeks after the changes. By the beginning of 2015, the “Milano” concept is scheduled to be expanded to about 200 fruit and vegetable departments.

With the “textile” concept, our sales line is continuing to tap the high level of differentiation potential offered by one of the most important product groups. Real is striving to become one of the leading sellers of textiles in Germany. By focusing on in-house development, increased direct sales from relevant procurement markets and a consolidation of suppliers, the textile segment is repositioning itself. As part of this effort, our sales line is modernising the product presentation of clothing collections in all hypermarkets. The basis of these changes is a comprehensive analysis of customers. In addition to focusing on proven basics, classic clothing and seasonal trends, Real is concentrating on textiles that can be combined with one another in a number of ways. The concept is unique and is setting new standards. In the drugstore department “Meine Drogerie”, Real has developed a new concept that creates a more emotional shopping experience. It has already been introduced in 31 stores and will be used in all other store refurbishments.

With its modern store concepts, Real is underscoring its leading role in Germany’s food retail industry. This simplifies working relationships with business partners. For suppliers, Real has become a pacesetter in the addition of innovations to its product mix. Furthermore, Real category management is working closely with manufacturers to develop brand-name products exclusively for Real and is continuously developing its own innovations in the area of customer approach and services.

Closer to the customer

Another element of this systematic transformation is the sales line’s territorial strategy. After completing the pilot phase launched at 32 stores in 2013, Real will introduce it at all 307 hypermarkets across Germany. The objective is to better leverage existing customer potential in the stores’ catchment areas. To this end, the sales line analysed each hypermarket’s catchment area using data provided by the Customer Information Management (CIM) and Controlling departments. Data about customer groups as well as information regarding competitive influences and purchasing power were also evaluated. These data identify the areas of the store that have the greatest potential: in terms of regaining former customers and attracting new ones through targeted advertising activities, increasing customer frequency and boosting the average consumer transaction value. Using these findings, stores can more precisely address the needs of customers, develop more specific measures and tailor their product ranges. Continuous and accurate controlling of the data generated each day reveals whether decisions were effective or whether the stores must take additional steps.

Own-brand share continues to grow

With the three own brands “real,- QUALITY”, “real,- BIO” and “real,- SELECTION”, Real offers its customers an alternative to traditional brand-name products priced in the medium-to-upper segment that is both inexpensive and of equal quality. With “TiP”, the sales line also runs one of Germany’s most well-known own brands in the budget price segment. In October 2013, another brand was added to the own-brand line-up: the “Marke ohne Namen” (No-name brand) is specifically designed for the customer group whose buying power falls below that of average consumers and offers prices that are lower than the discount level. The slogan “Ohne Schnickschnack. Ohne teuer.” (No frills. No extra cost.) sums up the brand promise. The products clearly distinguish themselves from the other own brands sold in food retailing. After starting with 20 products, the range has been expanded to 100 food and non-food items in response to positive customer feedback. As an example of the quality found in the “Marke ohne Namen” line of products, the “MoN fruit-nut mixture, 500 g” won the Salute to Excellence Award as the best own-brand product from the Private Label Manufacturers Association (PLMA) just eight months after its store introduction.

During the reporting period, Real had more than 5,500 own-brand items in its product range. The products that Real sells under its own name help to sharpen the brand’s profile. In addition, the margins of own-brand products are frequently better than those of traditional brands. Real also has exclusive own-brand food and non-food products that do not include “Real” in their names. As part of this strategy, Real introduced Sôi, the own-brand line of drugstore products at the beginning of financial year 2014/15.

Round-the-clock shopping

Real has designed all of its digital projects in a way that will bolster the stores’ stationary business. The effort has been running very smoothly ever since our sales line took over the logistics of the online shop in August 2013 and the online operation has been more closely integrated into the stationary business: sales are well above the previous year’s level, and the cost structure has been significantly improved. The four hypermarkets in Bochum-Wattenscheid, Wildau, Göttingen and Böblingen-Hulb have assumed the role of master stores: they put together the products ordered online and ship them. Customers can choose to have their purchases delivered to their home, to a Deutsche Post Packstation or to their local hypermarket free of charge. Working people in particular benefit from longer opening hours with the store delivery option. This system creates new incentives for customers to visit our hypermarkets.

In addition to the non-food business, the food segment can profit from the new online solution. In October 2013, Payback coupons were linked to the Real app. The digital coupons are activated by the app, and the customer only has to present the Payback card at the cash register to collect extra points. The app has been found to create an additional buying incentive, something that will promote customer frequency and sales. Each month, customers redeem about one million e-coupons using the Real app. Following the relaunch of the Real app in September 2013, it was the most frequently downloaded app in the lifestyle category of the Apple App Store with 32,000 downloads. By the end of September 2014, the app had been downloaded 750,000 times.

As part of its multichannel operations, Real operates two drive-thru grocery stores in Isernhagen-Altwarmbüchen near Hanover and in Cologne-Porz. Customers can order food and drugstore items online at www.real-drive.de and then pick up the order two hours later at one of the two pick-up stores. In the upcoming financial year, the drive concept is scheduled to be introduced to at least two other stores.

Turning customers into fans

During the reporting period, Real modified its entire advertising activities to reflect the new, modern marketing concept. The objective is to be authentic and turn customers into true fans. As part of this work, the weekly advertising flyer was completely redesigned in January 2014. The result is a more modern, dynamic and attractive flyer with a high level of brand recognition.

Since March 2014, the new Real advertising campaign has given an authentic, credible and emotional new look to the Real brand. The main characters of the TV commercials are actual Real customers in everyday settings. The four ads broadcast during the reporting period promoting textiles, barbecuing, the World Cup and drugstore items caught people’s attention and attracted new customers.

During the entire reporting period, Real exhibited product range expertise with supplemental advertising flyers and the continuation of the gourmet weeks entitled “Das Gute Essen” (Eat good food). Using the slogan “Zu Ostern das Beste genießen” (Enjoying the best at Easter), the sales line offered a large number of culinary specialities for traditional Easter meals and a relaxing Easter brunch. During the final quarter of the financial year, the “Italienwochen” (Italian weeks) were repeated. As is typical for this unique sales promotion, a special selection of high-quality products, some of which were available for only a limited time, were offered.

Real has extended its agreement with its long-time partner Payback until 2020. Our sales line is investing in additional customer services as a way of making shopping easier, faster and less expensive for Payback customers. As a result, Payback customers have been able to digitally collect their points for regular Real loyalty campaigns since mid-February. With this option, which was unique on its launch date in Germany, Real has bolstered its position as a leader in innovation in the German retail industry. In June 2014, Real became the first member of the food retail industry to issue an exclusive reward catalogue containing a large selection of brand-name products. In September 2014, customers were also given the option of redeeming their points in Real’s online shop.

To celebrate the World Cup, Real launched many exciting campaigns in its stores and online channels: following “Real Minis”, the second major campaign of the year was launched in May 2014 with the collectible cards “Welt Fußball Stars” (World football stars). During the competition itself, the website real.de was filled with World Cup information. A special World Cup section provided users with a live ticker, a schedule that included real-time results and up-to-date information. On the website as well as the app for smartphones and tablets created for this express purpose, users could also put their penalty-kicking skills to the test. They could also use the app to fill in a digital photo album. The special brochure “Kochen wie die Weltmeister” (Cook like a world champion) provided customers with some culinary inspiration from the eight nations whose teams have won the World Cup in the past. The products needed to cook these dishes were presented in an authentic setting in the stores.

Use of new media

Real has successfully employed new media for marketing and communication purposes. For its digital flyer strategy, the systematic use of individual digital communication channels and its “digital maturity”, Real received a rating of “good” on the Digital Readiness Index for Retailing Companies in Germany during the financial year. As a result, it finished in third place. Employing more than 80 evaluation criteria, the strategic consulting firm Neuland analysed the digital strengths and weaknesses of participating companies. The jury expressed particular praise for Real’s continuous commitment to the areas of “online”, “mobile” and “social”.

Real uses social media to maintain its dialogue with customers: the sale line’s official Facebook page had more than 423,000 fans as of mid-2014, a total of 63,000 more than a year earlier. Such results make Real the leader among its competitors. In addition, the sales line also informs customers about its products, services, deals and sweepstakes on its own YouTube channel and the microblogging platform Twitter.

Customer satisfaction rises again

The results of the Customer Barometer 2014 showed that Real made further improvements regarding the quality of meat and cold-cut products as well as in the fruit and vegetable department. In terms of employee friendliness and expertise as well as value for money, our sales line continued to make significant strides regarding customer satisfaction compared with the first survey year. The Customer Barometer is a telephone survey of about 34,000 German consumers that Real conducts once a year, most recently in January and February 2014. The survey questions address service aspects that are very important to Real. These provide the basis for the calculation of a performance index. Furthermore, Real has used additional indices to measure the trust and loyalty of its customers since 2010.

Responsible business practices

In addition to freshness, product variety, price perception and digitisation, the issues of sustainability and social responsibility play a major role at Real. For this reason, the company has integrated sustainability into its strategy and is expanding its social and environmental commitment throughout its entire value chain. In line with its credo “Handeln aus Verantwortung” (Responsible business practice), Real is carrying out a large number of projects and activities in the areas of product range, environment, employees and customers. In one reflection of this effort, our sales line is continuously increasing the share of socially fairly and environmentally consciously produced goods and regional products in its assortment, systematically investing in energy-saving technology and efficiently using resources at its stores. Social commitment forms another central pillar of Real’s sustainability activities. Real plays an active role in a large number of charitable projects and regularly organises local collection drives to support social initiatives. During the reporting period, Real joined its customers in donating more than €800,000.

For more information about the sustainability activities of Real, see the combined management report in chapter 8 Sustainability management and the METRO GROUP Corporate Responsibility Report 2013/14.