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End of online dreams - "Adler focuses on stationary business"

The term "disillusionment" is an inadequate description of the German fashion trade's turning away from e-commerce as a commercial savior.

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End of online dreams - "Adler focuses on stationary business"

The term "disillusionment" is an inadequate description of the German fashion trade's turning away from e-commerce as a commercial savior. At least since then, the failing Düsseldorf industry giant Peek

The medium-sized company Adler is now one of the first to draw a clear line under the former digital growth dreams and permanently assigns sales via the Internet only a secondary role. "Adler is aiming for a ten to twelve percent online share of sales - it doesn't have to be more," said company boss Wolfram Simon-Schröter WELT. In perspective, this also corresponds to only a minimal increase in the share. It is currently at 8.5 percent.

With 130 shops, Adler is one of the largest medium-sized companies in the industry and has redefined itself a good two years after its insolvency. The expansion of e-commerce was originally the focus of the restructuring plans of the new owner, the Zeitfracht Group managed by Simon Schröter. The online shop should bring in up to a third of the proceeds. Adler was considered a latecomer here.

But it quickly became clear that the concept would not work, said the company boss in a conversation with WELT at a company location in Cologne: "The development of the online business did not work out as we had imagined. We noticed that early on and changed course.”

Those who did not react consistently ran a high cost risk - see P

The Rhenish managers were in good company with their online euphoria. Only a short time ago, experts largely agreed that the future of fashion retail would be digital. The corona pandemic acted like a propellant. In 2021, when the fatal course was set in Düsseldorf, fashion sales in Germany were eleven percent below the level of the last year before Corona, 2019, according to figures from the Cologne retail research institute IFH.

Those who sold clothing online could still look forward to a 37.3 percent increase in sales, while stationary business collapsed by almost 32 percent. In no retail sector are these gaps wider.

But since then the tide has turned. The fact that online champion Zalando recently had to announce the loss of a few hundred jobs seems like an exclamation mark of the turnaround. According to Simon-Schröter, Adler senses that customers are returning to traditional shopping in stores.

"What we lose in the online sector, we gain in stationary retail," said the manager and announced a 180-degree turnaround in investments: "Adler focuses on stationary business in specialist stores, i.e. in shopping centers or on the Green field.” This core area is gradually switching to growth: “By 2026 we want to open ten to twelve more locations.”

A good two years after Adler went bankrupt in January 2021, the restructuring is now complete, according to Simon-Schröter. In the course of the bankruptcy, the insolvency administrator cut the number of jobs by 500 to 2,600. The number of jobs will now remain “essentially” stable, the company boss assured. The "dust removal from the Adler brand" has also been completed. Adler always suffered from the image of mainly selling conservative clothes for older people who were less demanding in terms of fashion.

Shops with the magenta lettering are still out of place for those on the hunt for haute couture. "Adler is not a highly fashionable supplier, we are more of a follower," admitted Simon-Schröter: "We sell clothing for people who are looking for good value for money."

However, the chain, which used to focus on its own brands, has polished its range with manufacturer brands such as Tom Tailor, S. Oliver and Esprit and modernized its own appearance. In around 50 branches, cafés sweeten the stay, the rest should follow. A fringe range with books, waffle irons and small electronics is intended to boost margins and customer interest.

The recipe seems to work. Adler is profitable again. In 2022, the chain achieved net sales of 321 million euros with a net profit of around four million euros, explained Simon-Schröter. “We want to show what we can really do in 2023. Over the year as a whole, Adler anticipates an increase in sales of around ten percent and a moderate increase in earnings.”

However, the profit is capped by a significant increase in costs. Last year, the clothing retailer had to spend 8.4 million euros more on energy and other cost factors than in the previous year.

Simon-Schröter is convinced that the e-commerce hype in fashion is not just temporary, but permanent: “I expect that the online business for clothing in Germany has reached a high plateau and will now tend to decline .” With this assessment, he refers to the figurehead of e-commerce par excellence: “By the way, Amazon founder Jeff Bezos predicted such a wave movement years ago.”

At least the days of effortless growth are over. While a broad influx of new customers has so far ensured reliable growth in online business, companies now have to cultivate existing customer contacts more intensively in order to achieve any growth at all.

In addition, e-commerce has lost its ecological innocence in the eyes of potential buyers. "For reasons of sustainability alone, many customers are reluctant to see the topic," observed Simon-Schröter. According to a study by the Returns Management research group at the University of Bamberg last autumn, no other product range returns more packages to the sender.

A good 64 percent of all fashion packages are then returned. Even if large e-commerce senders repeatedly assure that the lion's share of returns are viewed, processed and resold, many consumers apparently remain somewhat uneasy about the environment.

According to Simon-Schröters, the shift to stationary purchasing has recently intensified: "In January and February 2023, we achieved a 26 percent increase in sales compared to the same months last year," he said. The vehemence of the growth also surprised the management. Discount campaigns, marketing changes and the engagement of European Bobsleigh Champion Laura Nolte as a brand ambassador would have contributed to this.

Adler was one of the most important new acquisitions for the Zeitfracht Group, which was originally only active in the areas of logistics and process optimization. Wolfram Simon-Schröter (42), CEO and husband of the sole shareholder Jasmin Schröter, has built a conglomerate of a wide variety of activities from the family company through around a dozen acquisitions since taking over the managerial job eight years ago.

These include the regional airport of Rostock-Laage, the airline German Airways, the book wholesaler KNV, the aerospace service provider PTScientists, the Nuremberg printer Hofmann and, most recently, the chocolate maker Leysieffer.

The common thread behind the operationally disjointed pieces of the puzzle is the need to get crisis situations under control. Most takeovers were made out of bankruptcy. "Restructuring is easier if you have a careful look at the processes in a company. Logisticians can do that, they are process experts,” Simon-Schröter tries to explain.

Figures, according to the trained banker (Deutsche Bank, Apotheker- und Ärztebank), only insufficiently reflect the truth about the substance of the objects to be bought: "A takeover - whether from insolvency or not - is 98 percent based on gut feeling and go for it two percent on mathematical analysis.”

Despite the numerous takeovers and half a dozen share sales in recent years, Simon-Schröter does not want to be compared to hedge funds or financial investors, which former SPD leader Franz Müntefering once denounced as "locusts". “We look at the companies for a year or two. Once the business model is stable, we want to integrate them as fully as possible,” said the Zeitfracht boss.

The concept costs strength, but ultimately promises success. That's why Zeitfracht chose the hummingbird as the company logo. Because the colorful, agile lightweight from the bird world is clever and tough: "Hummingbirds are often underestimated. And they live longer than locusts.”

"Everything on shares" is the daily stock exchange shot from the WELT business editorial team. Every morning from 7 a.m. with our financial journalists. For stock market experts and beginners. Subscribe to the podcast on Spotify, Apple Podcast, Amazon Music and Deezer. Or directly via RSS feed.

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