Presentation of the opportunity situation
METRO GROUP has numerous opportunities to ensure long-term positive business developments. Above all, these are due to the fact that we rigorously respond to our private and professional customers’ needs. Our key goal is to create added value for our customers. To this end, we tap new sales channels and make use of the opportunities resulting from demographic trends in mature Western European markets as well as from population growth in developing and emerging countries. We analyse global trends and take decisions aimed at systematically exploiting opportunities of the future.
Opportunities from the development of business conditions
Following two years of weakness, the global economy is back in recovery mode. With a view to 2014, we therefore generally expect higher growth rates in all regions where METRO GROUP does business compared with the previous financial year. Our sales and earnings could profit from a further distinct improvement in the 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 expand our activities in China, Russia and Turkey, in particular.
Reductions in red tape can help ease METRO GROUP’s entry into new markets. Goods traded between countries of the European Union (EU) which have concluded a free-trade agreement could be shipped custom-free or at reduced custom rates. In our view, ongoing negotiations regarding an agreement to facilitate trade are particularly promising. Imports and exports could be simplified and the costs of cross-border exchanges of goods could be reduced by 10 per cent. We therefore welcome the negotiations of the World Trade Organization (WTO) and trade negotiations with various non-EU countries.
Strategic business opportunities
The METRO GROUP 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 Weaker market participants have withdrawn from the market, especially in countries that were hit particularly hard by the economic and financial crisis.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 (for example, Germany, Southern Europe). The transformation and restructuring measures we have already launched aim to improve these companies’ market position and boost their profitability.
By optimising sales concepts and modernising stores, we are creating opportunities to win new customer groups. 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 and investments in innovative sales formats. At the same time, we see substantial opportunities in the expansion of our delivery channel, the tapping of additional professional customer groups in our cash & carry business, and in the sensible dovetailing of stationary and electronic retailing in all sales lines.
Internet sales are an important opportunity for our company’s future success. Online retail is experiencing strong growth. We expect this development to continue and project continued competitive momentum both in the stationary business and in Internet retailing over the medium term. As a result, it is imperative for METRO GROUP to further strengthen its Internet sales channel. All our sales lines now have online shops in Germany and many other countries. In the short financial year 2013, we made important strides in our transformation from a purely stationary provider to dovetailed multichannel sales operations with the optimisation of the online shops operated by Media Markt, Saturn, Redcoon, Real and Galeria Kaufhof. Unlike strictly online providers, we thus create real added value for customers. All METRO GROUP sales lines are transforming into multichannel companies with the objective of so-called “no-line retail”, that is a maximum integration of market – online – mobile. 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. This approach ensures control over feasibility and security risks as well as risks related to the integration of these innovations into our existing systems. We regard the following trends and technologies as opportunities for our company:
- IT solutions for end consumers can also be used within the company. This development is reflected particularly in the use of mobile devices.
- We are testing the extent to which we can take delivery of computing and storage capacity from external partners over the Internet within the context of cloud computing. Our group company METRO SYSTEMS is providing initial solutions of this type.
- Customers are increasingly using multiple channels to obtain information or purchase goods, including social networks and mobile technologies. We address these topics in a targeted manner, for example through own Facebook pages. In addition, we use smartphone applications and external sales platforms.
Demography offers another tremendous opportunity for METRO GROUP. Aging populations in Western Europe and the growing concentration in economic and cultural centres dominate our customers’ current and future needs. Our sales line Galeria Kaufhof has already won several awards for the approach it is taking, of regarding all age groups and to meet the needs of older people. 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. In this area, we have set a goal with our climate protection target that will indeed require investments, but that will save money in the end by lowering energy costs, in particular. In turn, these savings will create financial and environmental benefits and improvements.
Starting in the next financial year, the operational activities of our real estate company METRO PROPERTIES will be integrated into the sales lines to ensure efficient processes and solid cooperation in the context of METRO GROUP’s current transformation. METRO PROPERTIES will focus on the key value drivers in real estate and portfolio management, project development and transactions. METRO PROPERTIES conducts regular benchmarkings 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 which help the sales lines enhance their appeal to customers while raising the value of METRO GROUP’s property portfolio. These values are supported by active and intelligent portfolio management. Targeted transactions ensure that risks and opportunities in the property portfolio are balanced carefully. In this way, METRO PROPERTIES makes an important contribution to the strength of METRO GROUP.