The situation at Galeria has been characterized by restructuring, losses and a changing retail sector for years. Basically, it remains to be said: Yes, the group is now in a more stable position and the restructuring course seems to be bearing fruit, at least in terms of the cost reduction programs. But where exactly is the former department store currently on its path to realignment – and where should the journey go?
It is clear that the big questions remain for now. However, it is unclear how sustainable the current improvements made by management really are and what risks could trigger renewed crises. In view of this, it is worthwhile to clearly identify the problems and at the same time outline realistic ways forward – with an eye on the whole rather than on small-scale rescue attempts.
Evidence of progress
First of all, on the positive side: noticeable progress has been made with regard to the key cost savings programs and key decisions at management level are now made in a focused and targeted manner by two managing directors.
In the post-Covid period, Galeria achieved significantly lower rental charges in the 83 branches at standard market conditions. In addition, new collective bargaining solutions have been negotiated, especially with stationary employees. A consistent reduction in administrative structures was also implemented.
The substantial adjustment of the structures and costs in the first phase of the renovation therefore appears to have been successful. Galeria is moving towards profitability efficiently and effectively. Significant strategic stakes have been taken to promote sales. With a view to the targeted growth, the new financial year with the upcoming Christmas business will provide a good initial indication of whether Galeria can actually achieve its ambitious goals.
Dirk Boventer is partner and director of the consumer goods & retail department at the Munich-based management consultancy Atreus. He has more than 20 years of experience in general management, sales and marketing.
A lot has happened since Beetz joined
Overall, a lot has happened at Galeria since Bernd Beetz joined. In addition to the previous frequency of around 200 million visitors per year, currently defined product groups are controlled with customer relationship management data in all stores in order to make the best possible use of seasonality in a still cautious shopping mood. The store managers with their local market knowledge play an essential role in offering events as an experience.
Strategic partnerships have been entered into with the food discounter Lidl and the sporting goods chain Decathlon and are intended to further increase the footfall in the area and, ideally, the attractiveness of Galeria among new customer groups. The return to the “Payback” bonus program also makes it possible – provided it is used on a customer-specific basis – to increase the shopping cart, the frequency of visits and the loyalty of customers.
Further partnerships are necessary
However, further strategic partnerships with credible younger brands in the “Young Family” environment are still a long way off. How shoppers of food or sporting goods can be converted to other Galeria product groups and encouraged to visit the department store regularly remains a challenging task with regard to the targeted use of business intelligence and AI tools.
It is therefore now important to make the holistic perception of Galeria as a “brand” – characterized by temporary impulses as an experience center as well as the clever curation of product groups on the sales floor – perceptible for customers and thus become an integral part of their individual shopping trip. The question “When do I go to Galeria?” should be able to be answered clearly by the existing and intended target groups.
Some key problems remain
In general, the bottom line is that despite the positive developments outlined above, Galeria has still not solved three fundamental challenges.
First: readjusting the business model. The classic department store is fighting against growing online competition, changing consumer preferences and rising operating costs. Balancing an extensive product range, an ambitious on-site shopping experience and a lean cost structure at the same time is extremely challenging. In addition, there are high fixed costs due to the branch structure; Flagship stores in major cities can convey brand messages, but they also require investment. The capital structure and refinancing are putting pressure on liquidity. Restructuring costs, interest burdens and migration issues consume resources. Therefore, clear investment prioritization and cash flow-oriented management are needed to counteract this problem.
Digitalization and more agile decisions are inevitable
The second core problem revolves around organization, culture and supply chains. Change in the workforce, digitalization, more agile decisions and clear responsibilities are inevitable – but they often also mean short-term stress and change-over. At the same time, the supply chain and purchasing influence margins through global procurement logistics, import dependencies and volatile prices. All of this makes the overall situation at Galeria vulnerable if you don’t take consistent countermeasures.
The question of relevance vs. profitability of individual locations is the third critical point. Which branches contribute the highest sustained profitability, remain viable, and which need to be redesigned? The digital transformation is stalling to some extent: omnichannel, click-and-collect, fulfillment optimization and the sensible use of personnel and customer data remain patchy. Brand positioning and customer experience have deficits. The central question therefore arises as to how Galeria specifically and emphatically wants to differentiate and stand out from online platforms, discounters and premium stores. And which experiences, services, events or collaborations can impress in the long term?
Solutions must be consistently demonstrated
In order to realistically address the problems that still exist and find solutions, a focused product range strategy is first necessary. Core brands must be clearly prioritized, high-margin categories strengthened and the private label portfolio expanded in a targeted manner in order to better manage price and supply chain risks. A consistent omnichannel model also urgently needs to be implemented. This involves seamlessly linking online and offline experiences, fast deliveries, easy returns and the use of personalized offers via digital tools in the store.
A clever space strategy is also required. Galeria should concentrate on high-sales, high-margin medium-sized branches in cities with less competitive pressure and productively consolidate the existing space through further partnerships.
Cost and cash flow management also needs to be closely examined.
But organizational changes are also necessary: clearly defined responsibilities for store performance, merchandising and digital are required, as well as investments in data skills and agile working methods so that decisions are made faster and more fact-based. In all of this, personnel policy should not be forgotten. What is required here are efficient processes without loss of quality, accompanied by targeted training in order to advance digital transformation and further promote customer engagement.
Clear priorities must be set in the future
Innovation must not remain a nice-to-have for Galeria. Partnerships with fashion brands, pop-up formats, experience shops and event models should be regularly integrated to increase attention and visitor frequency. Circular economy such as rental or lending models for selected categories could open up new sales channels and conserve resources. Sustainable product lines and transparent supply chains are also essential to create trust and meet regulatory and social requirements.
Conclusion
The positive cost effects are initially realized. What is absolutely needed in the next step is the shared mission for continuous sales growth. This can be differentiated based on location, but must be managed sustainably and profitably by the entire group in terms of the key product groups. The Galeria team, from the managers and clever minds in the new headquarters in Düsseldorf to the individual store managers and the sales staff, should be able to experience and live through the change and transformation positively. This is the only way to win customers over the long term.
Not least for this reason, Galeria’s management must set clear priorities in the future, implement extremely effective structures and focus on profitability – instead of continuing to focus solely on sales volume.
Ultimately, there needs to be a clear, communicated roadmap that is regularly updated to investors, employees and branch partnerships. Openness about goals, successes and risks is just as important as a willingness to make course corrections if necessary. With these steps, Galeria could build a safer, more profitable future where stability, customer centricity and traceable returns are once again a priority.