Issue 02 /  June 2015

DIVERSITY WINS   Diversity as a success factor for trade 

OTHER TOPICS IN THIS ISSUE Insights: How own brand products are born Wednesday Socials: With Prof Marcel Fratzscher and Prof Gunter Dueck Interview: What will town centres look like in the future?

AGENDA 

Only those who adapt are fit for the future the METRO GROUP Trade Letter explains how we can achieve this and bring the concept of diversity management to life.

As a retail company, we can only succeed in the long term if we understand our customers and respond to their needs every day. We feel the effects of social trends and changes very quickly. It is clear to see that our customers are getting older and more international. More and more of them are shopping online and using their smartphones to obtain information and compare prices before making a purchase. Compared to a few years ago, they want more regional, organically grown, vegetarian and vegan food – and they demand greater transparency and sustainability. These are just a few examples that illustrate how the world is changing around us. We need to adapt as a company to keep up with these developments. One thing is key in this regard: we must reflect the diversity of our customers in our own ranks, making use of the wide range of talent and potential in our team. The ‘Focal Point’ section of this edition of

Published by: METRO AG, Corporate Public Policy, Charlottenstrasse 46, 10117 Berlin Tel.: +49 30 2088943-41, Fax: +49 30 2088943-43 Email: [email protected] Internet: www.metrogroup.de/politik  @DasGuteessen Responsible for the content: Michael Wedell 2

As retailers, one social development that we are currently examining in close detail is structural change and its effect on town and city centres in Germany. In April, the Federal Ministry for Economic Affairs and Energy, the German Retail Association (HDE) and trade union ver.di launched the Retail Dialogue Platform – a forum to focus on the challenges associated with structural change and to develop appropriate solutions. Expectations towards this platform and the future of town centres are the two main topics discussed by Boris Hedde, managing director of the Institute for Retail Research Köln (IFH), and Lovro Mandac, chairman of the supervisory board at GALERIA Kaufhof, in an interview starting on page 8. At the Wednesday Socials in Berlin and Düsseldorf, the subject of change was again on the agenda, together with the need to make pioneering decisions. We discussed which investments are required to secure the future of Germany with Professor Marcel Fratzscher, president of the German Institute for Economic Research in Berlin. At the first Wednesday Social at our head office in Düsseldorf, it gave me great pleasure to welcome Professor Gunter Dueck and to discuss with him the relationship between life quality and digitalisation.

Concept and editing: Stefanie Awe, Raphael Neuner, Michael Wedell Photo credits: p 7: Tobias Koch / METRO GROUP; p 8 (top): IFH Köln; p 8 (bottom): GALERIA Kaufhof GmbH; p 9: METRO GROUP; p 12: BMUB / Harald Franzen

A review of both events can be found on page 7 and in our digital representative office at http://politik.metrogroup.de/ mittwochsgesellschaft. In the ‘Eating Good Food’ section of this issue, Federal Environment Minister Dr Barbara Hendricks explains what she looks out for when buying groceries. I would like to take this opportunity to thank Dr Hendricks again for taking the time to answer our questions. I hope you enjoy the insights offered in this edition of our Trade Letter! HEIKO HUTMACHER MEMBER OF THE BOARD AND CHIEF HUMAN RESOURCES OFFICER AT METRO AG

An in-depth interview on the subject of diversity management with Heiko Hutmacher and Countess Aletta von Hardenberg, managing director of the German Diversity Charter, can be found online at http://politik.metrogroup.de.

Editorial deadline: 29.05.2015

FOCAL POINT

Diversity as a success factor – why differences matter more than ever before A large product range is one of the key success factors for retail companies, and meeting the diverse needs and requirements of a heterogeneous customer base is a daily challenge. For this reason, businesses that want long-term success have to match the diversity of their customers in their own ranks. Berlin, Karl-Marx-Strasse 231: there’s a lively hustle and bustle in the Neukölln branch of hypermarket chain Real. Next to the many German products in customers’ shopping trolleys, there is also aromatic sucuk sausage, stuffed vine leaves, bulgar wheat, feta cheese, ayran, flatbread and olives – many of which come in large packages. Whereas the average German household consists of 1.8 people, the number is 2.5 times greater for Turkish families. Store manager Wolfgang Paulini explains, ‘People of more than 150 nationalities live in Neukölln. We want to adapt to the expectations of our customers as well as we can.’ Most of the shop assistants speak several languages, and the shelf labels are all in both German and Turkish. In this way, the Neukölln store is a very

Exclusion

Segregation

Inclusion

‘real’ example of inclusion in action – the natural coexistence and cooperation of different cultures and nations, and not just the integration of a visible minority in an unfamiliar environment. For a modern retail company, however, putting diversity into practice is more than a significant advantage in terms of competition and location; it is also an important pillar in the implementation of corporate strategy – for good reason.

A changing society People have been discussing demographic change for a long time, but this is now accompanied by a fundamental shift in social values. Debates that began back in the 1960s and 1970s about equality between the sexes as well as different nations and cultures are now firmly anchored in society. Diversity and equal opportunities are also frequently discussed issues on the political agenda. The coalition agreement between the CDU, CSU and SPD, for example, set out the following: ‘We see diversity as an opportunity and will therefore strengthen the Diversity Charter and a ‘diversity’ mindset in the economy by working together with businesses. We will oppose discrimination of any form.’ The approach of embracing diversity as an opportunity was recently made manifest in a Green Paper published by the Federal Ministry of Labour and Social Affairs entitled ‘Work 4.0’. This document states that opening up the labour market to women, older people and

those with disabilities or an immigrant background will play a central role in tackling challenges such as demographic change and the increasing shortage of skilled workers. Against this background, one of the main regulatory priorities of the federal government in the current legislative period is to achieve gender equality at the workplace. For example, a law introducing a quota for female managers was passed with a large majority in early 2015, and current talks are geared towards establishing a law for equal pay.

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Fewer people, older and more colourful – demographic change will continue to change our society. Businesses and politicians must act together in response to the challenges this presents. Diversity management allows companies and public services to come up with creative ideas. Inclusion, participation, flexible working arrangements and a consideration of different stages in life are key concepts when it comes to defining work in a diverse society.

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Kerstin Griese, Chairwoman of the Bundestag Committee on Labour and Social Affairs

Use diversity – don’t just tolerate it From a negative perspective, diversity means deviation from the norm. During the industrial boom, too much diversity 3

ideas. At the same time, they learn to accept new points of view or to vocalise and defend their own, possibly controversial opinions. All of this can increase staff motivation and commitment.’

was viewed with a critical eye – especially at large companies. It was easier to recruit, manage and standardise an homogeneous team where nobody stood out. Deviations from the norm were tolerated at best. Fortunately, things are now very different. In recent years, diversity management has emerged as an independent aspect of HR policy. The ultimate aim of these efforts is to benefit the company by drawing on social diversity rather than simply tolerating it.

How diverse is the METRO GROUP? The METRO GROUP believes that a trading company in today’s world must be just as diverse as its customers. Diverse teams support innovations and allow a genuine response to customer needs – and people of all ages can benefit from the dialogue between different generations. A glance at the figures shows that the METRO GROUP puts this principle into practice: people from 170 countries currently work for the METRO GROUP. Some 20 % of employees are older than 50, women account for more than 53 % of the total workforce, and the proportion of employees with disabilities is always above the statutory requirement of 5 %.

From the perspective of individual businesses, there are external and internal drivers for such a development. The most important external drivers are global competition and changing market demographics. Companies that want to create and sell products on the global market and to reach individual customers around the world require the professional expertise of a well-structured, varied team that reflects and understands the cultural and social diversity of the target audience. However, employees also stand to benefit, as explained by Andrea Schmitz, head of employer branding, inclusion, diversity and employee engagement at METRO AG: ‘When employees work in a culture of diversity, they are exposed to new impulses and

Furthermore, the METRO GROUP demonstrated its commitment to diversity by signing the German Diversity Charter in 2007. Since 2013, METRO has also been a board member of the Charter. At present, the METRO GROUP

THE DIVERSITY ICEBERG

Age

Gender Skin colour

Origin

Religion

Socio-economic status

Culture Disability

Education Sexual orientation and identity

Family status

Values and opinions

Skills and talents

Working style

Political views

Life experience

Language skills

Personality

Mindset Visible (above the surface) and invisible (below the surface) qualities that make up diversity

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The German Diversity Charter is a corporate initiative to promote diversity in companies and institutions. It was established in December 2006 and aims to improve the recognition, appreciation and integration of diversity as part of corporate culture in Germany. Organisations should create a working environment without prejudice. To date, more than 2,100 companies and public institutions have signed the Diversity Charter. The patron of the initiative is Federal Chancellor Dr Angela Merkel.

is taking action to anchor the issue of diversity even more firmly within the company. It has launched its own inclusion and diversity programme with the aim of driving a general cultural change internally. In-company workshops and a newly developed e-learning platform shall raise the awareness for inclusion and diversity among employees in all countries and at every level of the organisation. Implementation of the programme has already begun at METRO AG and METRO Cash & Carry. There are different priorities for action from country to country, and these are decided on an individual basis. For example, the need to achieve gender equality is not as urgent in Eastern Europe as in some Western European countries or in Asia, where, like in Germany, people are now discussing legal quotas. One of the main priorities in countries like France, Spain and Portugal is to improve the inclusion of disabled employees. The engagement has even been strengthened as a result of new legal requirements.

The sales lines The following examples provide an insight into how diversity management is put into practice by the different sales lines of the METRO GROUP. Disability Regarding the quota of disabled employees, the METRO GROUP is well above the statutory requirement of 5 %. It is especially committed to securing the availability of apprenticeships for people with disabilities. Since 2007, sales lines

WOMEN IN MANAGEMENT POSITIONS AT METRO CASH & CARRY WESTERN EUROPE

CASH & CARRY

FRANCE

SPAIN

EASTERN EUROPE

POLAND

CROATIA

ASIA

INDIA

JAPAN

FEMALE EMPLOYEES

40,3 % 51,1%  53,3 % 59,4 % 10,5 % 45,6 %

FEMALE MANAGERS

7,6 % 15,5 % 26,7 % 40,9 % 13,7 % 4,2 %

Proportion of women in the top three levels of management in selected METRO Cash & Carry countries in Western Europe, Eastern Europe and Asia (March 2015)

have been involved in a project organised by the Federal Association of Vocational Training Centres called ‘Incorporated training with vocational training centres’ (VAmB). Following a period in the classroom at the training centre covering theoretical topics, participants work in the store for a year with supplementary vocational classes and reinforcement teaching.

department stores, where they qualify as retail salesperson.

Thorsten Klingelberg, Real store manager in Hanover-Linden, is convinced by this model and regularly trains young people as part of the integrated programme. ‘Essentially, we see every apprentice as a separate responsibility whether or not they have a disability. Our main priority is to offer individual support.’

A notable example of including employees with physical disabilities can be seen at the Wiesbaden branch of GALERIA Kaufhof. Here two shop assistants are wheelchair users – something that is still rather uncommon in retail outlets. In this sense, store manager Karsten Sinnig faced some reservations when he employed them. Nevertheless, nobody could argue him down. He was adamant that it was time to simply give it a try. Sinnig puts into practice what is necessary for inclusion to succeed: a willingness to accommodate the needs of employees and to find individual, sometimes unconventional solutions.

GALERIA Kaufhof is involved in the same project and has also been working with vocational training centres since July 2014 to help people who can no longer perform their jobs get back into work. Participants in this retraining scheme complete the practical component of the programme in GALERIA Kaufhof

Gender Promoting equal opportunities at the workplace for men and women was a high priority for the METRO GROUP long before the introduction of a legal quota for women. Back in 2011, the METRO GROUP became one of the listed German companies to make a voluntary

commitment to increase the proportion of women in the top three levels of management. At present, female staff represent 18.5 % of the people who fill these positions at the METRO GROUP. The aim is to increase this figure significantly to 25 % across the organisation by 2017. This target applies not only to sales lines in Germany, but to all countries around the world where METRO Cash & Carry is present. Another concrete example of efforts to promote diversity and equal opportunities is the network Women in Trade (WIT), founded in 2013 by METRO employees. The aims of WIT are to increase the proportion of women in management positions in the long term, to promote internal and external dialogue, and to create better general conditions for women in the group. An issue of central importance when it comes to ensuring gender equality is a positive work–life balance. For this reason, the METRO GROUP encourages flexible working hours and workplace models in all sales lines. By offering 5

such options, the company allows employees to take a flexible and proactive approach to organising their individual lifestyles, family responsibilities and professional goals. For example, Media-Saturn provides flexible working hours and part-time parental leave for both mothers and fathers at the holding company’s head office in Ingolstadt as well as 24 nursery places in the local area and childcare facilities during the summer holidays. As a result of this commitment to its employees, Media-Saturn has been certified as a family-friendly company by the Hertie Foundation since 2010 as part of its audit ‘berufundfamilie’ (‘work and family’). The development of part-time working models is also a priority for Real, which is why both managers and apprentices have the option of working part-time.

WOMEN IN MANAGEMENT POSITIONS STATUS TARGET 2017 2014 METRO GROUP

WORLDWIDE

18,5 % 25 %

METRO CASH & CARRY

WORLDWIDE

21,7 % 25 %

METRO AG OVERALL

DE

23,8 % 25 %

METRO AG MANAGEMENT BOARD

DE

0 % 25 %

METRO AG SUPERVISORY BOARD

DE

25 % 30 %

Proportion of women in the top three levels of management (December 2014) and targets for 2017

Age The issue of demographic change concerns the sales lines of the METRO GROUP with respect to the changing needs of employees as well as customers. They are working on concepts to meet these needs. A main focus regarding employees is health and safety at the workplace. The METRO GROUP is currently analysing work processes in the company and optimising them in order to minimise any risk of health problems for the staff. Additionally, it has arranged a variety of 6

information and training opportunities to support employees when it comes to looking after their health. At METRO Cash & Carry Germany, a project called ‘Jobs for every age’ has been set up to deal specifically with the question as to how the workplace can be made more appropriate for an ageing workforce given that more than half of the staff are over 45 years old. As part of the project, METRO Cash & Carry is working with a number of experts, including teams at the German Sports University in Cologne and the Technical University of Dortmund, to investigate jobs in the goods inward department. The aim of the project, which is partly funded by the Federal Employment Agency and the Employer’s Liability Insurance Association for the Retail and Goods Distribution Industry (BGHW), is to develop a set of recommendations for ensuring that all jobs are suitable for people of all ages. Examples include improving workplace conditions such as noise, lighting, humidity and temperature as well as the optimisation of physical and mental workloads. At GALERIA Kaufhof, some 40 % of employees are already aged over 50. To benefit from the experience of older colleagues while promoting the exchange of ideas, the company deliberately makes use of mixed-age teams. GALERIA Kaufhof also takes demographic change into account with regard to shop design: more than 80 of the more than 100 branches have been awarded the quality certificate ‘Generation-Friendly Shopping’ since 2010. This seal identifies retail premises that excel in meeting the needs of customers of all generations in terms of service, product selection and customer advice. Specifically, this might range from wide aisles, highly accessible buildings and clear signage that is easy to read to shelves for bags at tills, specially adapted fitting rooms and additional seating.

Nationality The sales lines Real and METRO Cash & Carry are increasingly focusing on the intercultural background of their staff and drawing on this to maintain a competitive edge. At present, around 2,000  employees at Real hold a non-German passport and many more

have foreign roots. As a result, they literally speak the same language as their customers, and they can also provide valuable input when it comes to selecting products and coming up with innovative ideas. METRO Cash & Carry Germany has a strong focus on customer segments from specific countries. For example, the customer portfolio is structured in a way that allows certain customer groups to be cared for by customer relationship managers with a similar cultural background. Customer relationship managers with Italian roots are used as specialists for the Mediterranean food and drink segment, for instance, where they can make practical use of their knowledge of cultural and regional differences in conversation with customers. METRO Cash & Carry in Germany currently employs people from 82 countries, and the proportion of foreign workers is almost 10 %.

Sexual orientation The METRO GROUP demands and supports equal rights and the social acceptance of same-sex partnerships. To make a stand against discrimination and for tolerance, METRO Cash & Carry Germany took part in the Christopher Street Day (CSD) in Cologne in 2014 for the first time, represented by its wholesale outlet in Cologne. This commitment will continue in 2015 with the additional support of METRO AG. Greater attention to issues such as sexual orientation and sexual identity is also the aim of a new LGBT*I network that is now being created at the METRO GROUP – an employee community for lesbian, gay, bisexual, transgender and intersex people. Such efforts to establish a new culture of inclusion and diversity are extremely varied and entail considerable time and effort. However, the METRO GROUP firmly believes that they are worthwhile. Diversity empowers businesses. It allows companies to contribute to long-term success with creativity, knowledge and varied life experiences.

WEDNESDAY SOCIAL

‘We can no longer live on our reserves’ There is an urgent need for more public and private investments in Germany – this was the conviction voiced by Professor Marcel Fratzscher at the 21st Berlin Wednesday Social. claimed that local authorities in particular should have the power to make more investments. In his speech, Professor Fratzscher underlined the fact that today’s very favourable interest rates present an opportunity to close the investment gap. He concluded with the following words: ‘This is an opportunity that exists here and now, and I hope we will seize it.’ Videos of the Wednesday Socials can be found online at www.youtube.com/user/videos4metro You can also join the discussion at http://politik.metrogroup.de/mittwochsgesellschaft Professor Marcel Fratzscher (right) in conversation with moderator Volker Wieprecht (left) at the 21st Berlin Wednesday Social on 6 May 2015

Around 200 guests from politics, business and society accepted the invitation from the METRO GROUP, the German Retail Association (HDE) and the Federation of German Wholesale, Foreign Trade and Services (BGA) to attend a discussion with Professor Marcel Fratzscher in the atrium of the METRO GROUP’s offices. The subject was the investment gap and why Germany should invest more in its future. Professor Marcel Fratzscher, president of the German Institute for Economic Research (DIW Berlin) and chairman of the expert commission on strengthening investments in Germany, delivered a talk in which he summarised the current situation as follows: ‘The problem is not a shortage of financial resources. Public budgets have huge surpluses at present. These could be used to pay back debt, reduce taxes or to make public investments.’ The view that

Germany is not short of capital is shared by Enak Ferlemann, Parliamentary State Secretary at the Federal Ministry of Transport and Digital Infrastructure: ‘The issue we face is rather that money cannot be invested in the right places.’ Gerhard Handke, managing director of the BGA, emphasised that the debate on investment is by no means new: ‘For 25 years I’ve been knocking at the door of politicians, and it’s about time they do something.’ Investments in the education system, road and rail networks, the energy supply infrastructure and the development of digitalisation projects – all of these are of central importance for business. The expert commission led by Professor Fratzscher also identified areas in urgent need of investment in an official report that was submitted to the Federal Ministry for Economic Affairs and Energy on 21 April 2015. The same document

FIRST WEDNESDAY SOCIAL IN DÜSSELDORF On 10 June 2015, the first Düsseldorf Wednesday Social took place as part of Campus Week, a series of events at the head office of METRO in Düsseldorf. On this occasion, author and maverick Prof Gunter Dueck discussed the subject: ‘Is everything getting better? The connection between life quality and digitalisation.’ The METRO GROUP invited guests to attend the Düsseldorf Wednesday Social in cooperation with the Retail Association of North Rhine-Westphalia and the NRW State Association of Wholesale, Foreign Trade and Services. Tweets about the event featured the hashtag #MGDUS.

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INTERVIEW

‘Individual solutions instead of rigid specifications’ We spoke with Boris Hedde, managing director of the Institute for Retail Reseach Köln (IFH) and Lovro Mandac, chairman of the supervisory board at GALERIA Kaufhof. The central question: How can politicians and businesses create attractive city centres with resepect to changing shopping behaviour and to the digital transformation? Mr Hedde and Mr Mandac, do you prefer shopping in town centres or rather online? Boris Hedde: I am probably a very average customer in that sense because I have no real preference. It depends on the situation. I really like to go shopping in town from time to time – especially for things you would want to hold in your hand like clothes or something similar. But I am just as happy to buy books, music and the like online. Lovro Mandac: I make a conscious effort to go shopping in town. Not only do I enjoy it, but I can also gain experiences that might be useful for my work. I always keep my eyes peeled when I am in town so I can get a feeling for who goes shopping these days as well as how and where they park, whether they use public transport, what interests them and so on. Has anything changed in this regard over the last 10 or 15 years in your view? One thing is very different. About fifteen years ago, customers would have been thrown out of high street shops at 2.30 p.m. on a Saturday afternoon. This was before the Federalism Commission introduced major changes to shop closing times, when people completely changed their behaviour in just three weeks. As a result towns and cities experienced a wonderful rebirth! However, we noticed the same trend in our Dinea restaurants: suddenly our breakfast business was not as good 8

because people had all day, although this also meant they were spending much more time in town. Out-of-home dining is another strong indicator. It is a segment that has grown steadily in recent years. This demonstrates that people are doing more outside their own four walls – and this is a great opportunity for trade! The Retail Dialogue Platform was launched in April. What do you hope this platform will achieve? First of all, I am ver y pleased that with this platform the issue of retail has been addressed at the ministerial level. Previously, it was not given much importance in terms of overall attitude and staffing decisions. Now there is finally a project that allows those in the retail sector to bring topics to the table and to discuss them with stakeholders. I think it is a big step – one of many, but an important start. I absolutely agree. Unfortunately retail is still given short shrift in the world of politics. This is true locally, as well as regionally and nationally. We are simply not seen in the same way as players from other sectors, the industry, for example. That is a pity because it is ultimately trade and retail companies that sell what industry produces – and if we do not sell it then there is no need to produce it. This argument is something people in politics have not yet dealt with in a proper way.

Boris Hedde has been managing director of the Institute for Retail Research GmbH Köln (IFH) since the end of 2009. Before this, he worked in market research for almost ten years with a particular focus on brands and communication. He held positions at companies such as research and consulting firm Sport + Markt AG and research company YouGovPsychonomics.

Lovro Mandac has been chairman of the supervisory board at GALERIA Kaufhof GmbH since 2014 and serves as CEO of the newly founded Galeria Holding GmbH. He held the position of CEO at Galeria Kaufhof GmbH from 1994 to 2014 after several other management positions. Since 2010, Lovro Mandac has also been vice president of the German Retail Association (HDE).

In your opinion, what action should emerge from the dialogue? Dialogue creates a certain amount of friction at first, and that is a good thing! We will give ever yone involved the opportunity to contribute their opinions and interests before discussing possible solutions together. We all know that nothing stays the same forever. The retail sector is undergoing some very fundamental changes. No one can say right now exactly in what direction it is heading and where it will be in three to five years. This makes it all the more urgent for us to sit down together and talk. We all need to pool our ideas and come up with something new. After all, I am convinced that people will continue to go shopping in town. Cities are interesting places! Young people in particular will still want a social experience in town. It is our responsibility to create the right opportunities. I would also add that the image of dayto-day work has changed. Many professionals are no longer tied to certain working hours. This has created opportunities for people to develop new lifestyles – and, as Sigmar Gabriel said, one aim of the dialogue platform is to discuss how people will want to live in the future. Ideally, we would like to make some recommendations for action based on the discussion. How concrete these will be depends on the willingness of different stakeholders to compromise and enter into dialogue, but in essence we hope to identify fairly definite steps. Three things will not change: accessibility, safety and cleanliness. These key criteria are what people demand from their towns and city centres. Accessibility is an especially important factor. If I have to drive around for an hour to find a parking space, I will be in a bad mood. All these issues have to be brought to the table so that we can find solutions together. What results must not be seen? When would you say that the platform had failed? You cannot ask that question – the platform will not fail. We would not be

Boris Hedde and Lovro Mandac in Cologne on 11 May 2015 discussing the future of town centres

participating in the platform otherwise. (They both laugh.) What is the aim of the ‘Prospects for a vibrant city’ workshop series? Vibrant town centres are without doubt a central issue for medium-sized retail companies. Digital technology is driving structural change at an incredible speed. The question is what can existing retailers actually do? Such businesses are bricks-and-mor tar operations to a large extent, which automatically means that town centres are an important consideration. We are discussing the development of our cities, our communities and our shopping habits. In the early days of online shopping, our stated goal was to offer the same product range online that was available in our larger stores. This has changed, today we have to think in broader terms. It is now easy to open an online shop with five million products – a scale that would be utterly impossible at a physical branch. But on the same topic, we must also ask why large online companies should be supported by the state, receiving benefits that are not extended to traditional retailers. I would like to emphasise again that retailers have received no assistance from the political sphere over the last 50 years. Take the reunification of Germany, for example,

when industry was given support in form of subsidies to establish new production sites. Things were very different for the trade and retail sector. If you had a policy wish list for urban planning in town centres, what would be on it? I want dialogue to begin. I want us to have debates, to argue, to find new ways of bringing different opinions together around the same table. There are some bitter truths that cannot be talked away. Customers made up their minds. They have legs, and they will go wherever they want – or use their hands to log on to the computer. We will have to decide together what conditions make us competitive. We can no longer rest on our laurels and assume that customers will come whenever we retailers want them to, as was the case 50 or 60 years ago. Customers now do what they want and are better informed than ever before – and rightly so. After all, the internet has created the greatest possible level of transparency in the market. Such an abundance of information has never existed before in this form. This combination of circumstances is what makes the matter so challenging. In a saturated market, customers already have ever ything they need. The art lies in ensuring more 9

success for retailers. What we have to do is not only to identify trends, but also we have to create new incentives, that make cities attractive to customers. This has to happen all the way down to the local level. At the end of the day, we have some very vibrant town centres, but we need to talk more to each other. The motto here is: ‘Do something good and talk about it.’ Many towns and cities forget to do so, partly due to limited finances. Similarly, adjacent municipalities have to get together and develop an overall plan. How can town centres be made more attractive? Is this more of a matter for business or politics? Studies have shown a correlation between the attractiveness of town centres and their ability to offer more atmosphere and experiences. Larger cities have an automatic advantage here because of their cultural offer. People might go shopping and then visit the theatre in the evening. There is no general formula. Every city – just like every retail company – must identify its own unique selling proposition. What can I offer to customers that is special? You see, as a textile retailer 30 years ago, you could have made an index card for each customer with his or her measurements and previous purchases. That would have allowed you to say with great confidence, ‘Look, I have just the right tie for you in stock.’ In this sense, retail has done very little. I do not think it is right to place the responsibility with only the retail sector or only politicians. Interaction is what matters. Blame solves nothing. Instead we need to focus on results. This already works quite well at shopping centres, where there is a manager who makes sure that right product ranges are available. The question is whether there could also be managers, or rather committees, in towns and cities, working together to ensure efforts are in place to make the area more attractive. Important factors on this front are a balanced selection of products and a good distribution of shops and leisure 10

In April 2015, the Federal Ministry for Economic Affairs and Energy (BMWi) launched the Retail Dialogue Platform in collaboration with the German Retail Association (HDE) and trade union ver.di. Over a period of two years, a dialogue between the relevant stakeholders – companies, associations, research institutes, trade unions, and authorities at the federal, state and local level – will address the challenges of structural change and develop possible solutions. Five workshop series represent a core component of the Retail Dialogue Platform, each with two to four sessions. The workshops are dedicated to the topics of digitalisation, technological challenges,

facilities. Retail, local authorities, real estate – all of these are linked, so we need to sit around the same table. The only thing we can say with certainty is no more frameworks and no more regulations, please! There are no ready-made templates or magic formulas. Every community, town and city simply has to find its own approach. How important do you think open access to Wi-Fi is in German town centres? With this in mind, what do you think about the draft law of the Federal Ministry for Economic Affairs and Energy to amend the Telemedia Act? Open access to Wi-Fi networks is a very important issue in the retail sector today. So far, however, we retailers have faced great legal uncer tainty when it comes to offering Wi-Fi in our stores. For that reason, Wi-Fi is not yet as widespread as we would like. The Federal Ministry for Economic Affairs and Energy wants to improve this situation with its proposed amendments to the Telemedia Act. This is an important step in the right direction. However, I am not yet convinced by the details of this legislation. Complicated registration and encryption processes tend to put off customers from using wireless

prospects for a vibrant city, prospects for rural areas, prospects for work and careers as well as competition policy. The Institute for Retail Research Köln (IFH) was commissioned to implement the Retail Dialogue Platform. The organisation is coordinating processes and content and will support the entire project from an analytical angle.

networks, but we want to make it as easy as possible for them to log on. We hope that the amendments to the Telemedia Act will be decided on soon. What is already clear to us is that we will offer Wi-Fi access in all of our stores as soon as possible. I share the same opinion. The next question is: What about power sockets for customers’ smartphones? But all jokes aside, I think this service could also be provided by retailers. Any final words? Freedom drives things forward. We do not need further regulation. First comes policy, then design. Let’s get together to work on it! Mr Hedde, Mr Mandac, thank you very much for this interview.

INSIGHTS

A new product in six steps Cherry and banana nectar is one of the latest additions to the own brand product range at Real. But how do such new products come into being? Real added more than 300 own brand items to its range in 2014. Responsibility for this process lies with an in-house team consisting of employees in own brand and quality management as well as procurement. There are six steps to creating a new product, each of which is explained below using the example of cherry and banana nectar – a new addition to the "real,- QUALITY" product range.

Brainstorming There has been an own brand alternative to a wide range of standard products for many years. Looking for new product ideas to close a gap in the market or address specific customer needs therefore calls for a creative approach. To get the ball rolling, the Real team comes together in a large group and discusses suggestions. This brainstorming session is based on various analyses of market trends and customer needs as well as observations of the competition. However, thinking about what goes on at home can also help: young children are especially fond of cherry and banana nectar. In most cases, these two juices are blended together by hand – so it is an obvious choice to offer ready-made cherry and banana nectar in a bottle or carton.

Supplier brief Hans-Peter Schellen, category manager for beer and soft drinks, contacts fruit juice manufacturers and suppliers before sending them a list of specifications for the nectar. This profile is created by the quality management team in order to provide the supplier with the minimum quality requirements for ingredients and

packaging. At this stage, manufacturers are told the estimated annual amount that Real intends to purchase and the price that will be charged when the final product is available in stores.

reached on which samples are acceptable and which are not. If necessary, the quality management team asks the manufacturer to improve or refine the product and provide additional samples.

Tasting

Design

This is where things g e t exc i t i n g . T h e manufacturers supply samples, and the Real team gets together for a tasting session. In addition to the flavour, they evaluate the appearance and smell. Everyone involved can and should express their opinion, and at the end a consensus is

It's not all about the content – attractive packaging is also important. With this in mind, Giulia Bottesini and her colleagues in own brand management develop a new packaging design. This is perfected internally following several rounds of approval. Of course, the layout also has to be checked by the quality management team with respect to food law. Once everyone is happy, the final versions go to print.

OWN BRANDS AT REAL „real,- SELECTION“: Premium products with ingredients of very high quality and elaborate packaging – or a particularly high level of innovation. „real,- BIO“: Certified organic products with high-quality organic ingredients. „real,- QUALITY“: High-quality or innovative products with attractive packaging. „TiP“: Products that offer the same quality and price as discount supermarket brands with simple but distinctive packaging. Defence against discount supermarket chains. „Ohne teuer.“: Basic products with simple but distinctive standard packaging. Lowest price in the market.

Production The manufacturer begins producing the nectar. ‘We select our suppliers with great care. Only suppliers with International Featured Standard (IFS) certification can qualify as own brand suppliers,’ explains Tomas Lux, category manager for food own brands.

Approval Before the product goes on sale, it is checked again by random sampling: Are all the details on the label accurate? Is the expiry date correct? The team closely scrutinises samples from the first round of production. Only when everything has been verified is the product listed, planned and ultimately supplied to the stores. 11

economy. This will strengthen economic growth and support the environment. What has improved noticeably in recent years? Customers are much more interested; they have discovered their power. Their shopping habits influence and direct processes. As a result, there is a greater supply of fair and sustainable products. This is a very encouraging trend.

… with Dr Barbara Hendricks Dr Hendricks, what do you look out for when buying groceries?  I look for regional products that are also seasonal. They taste good, and this approach makes shopping more environmentally friendly. Flavour and price do not benefit from long transport routes, warehousing and excessive packaging. What is ‘Eating Good Food’ to your mind? Nature produces the best food you can find. Things taste best without additives. Our health also benefits from natural food that is rich in nutrients – eating good food is an active form of disease prevention. Do you enjoy cooking? If so, what dishes? I’m not exactly a Michelin chef. In the kitchen, I’m usually given the tasks of cutting, peeling and washing. We normally have straightforward meals during the week – a little bit of everything.

DR BARBARA HENDRICKS FEDERAL ENVIRONMENT MINISTER She is a SPD politician and has held her current position since 2013. In 1994 she became a Member of the German Bundestag. From 1998 to 2007 she served as Parliamentary State Secretary at the Federal Ministry of Finance.

Fair conditions are important given the stiff competition in retail. The planned Electrical and Electronic Equipment Act will require both brickand-mortar and distance retailers to take back WEEE. Will online retailers have the same obligation if the law is passed? Every electrical device contains valuable materials, even those that are old and broken. In many cases, they also contain harmful substances that must be disposed of properly. We therefore want a new act that requires all retailers – online and physical – to take back WEEE if the sales area is over 400 sqm. Parliamentary consultations are still in progress. There would be various options for online retailers. In theory, they could cooperate with bricks-and-mortar retailers or arrange return options for customers.

The behaviour of the food and retail industries impacts the environment in terms of production, packaging, logistics and recycling. What are the greatest challenges in your view? We have to distance ourselves from the idea that we can forget about things that are thrown into the bin. Domestic waste is the end of one process but also the start of another. That's why you call it circular

The dual system in Germany has achieved excellent recycling rates in recent years. It was briefly supported by retailers in 2014 in order to maintain these results. Now loopholes must be closed and valid, transparent rules introduced – how will the Federal Environment Ministry achieve this? We are one of the EU countries that recycles the most packaging. Recent amendments to packaging regulations have closed any loopholes. This has prevented the temporary abuse of the system by some companies and ensures that packaging waste is collected close to individual households. A new recycling law should improve fair competition and further increase the proportion of recycled materials.

Corporate Public Policy, Berlin Office Raphael Neuner, Stefanie Awe, Felipe Hinrichsen Email: [email protected]

Corporate Public Policy, Brussels Office / EU Maria Heider, Bernd Wagner, Julia Münch Email: [email protected]

http://politik.metrogroup.de

www.metrogroup.de/bruessel

That means few ingredients but good quality. From time to time we also prepare larger meals with a lot of effort – French dishes, perhaps.

CONTACT

Corporate Public Policy Michael Wedell Tel.: +49 211 6886 1989 Email: [email protected] www.metrogroup.de/politik  @DasGuteessen 12